New data shows alcohol, cigarette and restaurant sales under pressure

Posted by James Ferre on 4th March 2009

The National Accounts, which show the economy contracted 0.5% in the December quarter, confirm that Australian shoppers are saving rather than spending, the Australian National Retailers Association – which represents some of Australia’s largest retailers including the nation’s two biggest supermarkets – said today.

“Retail spending was weak in the December quarter. Our appetite for imported consumer goods dropped sharply while household savings soared to their highest level in almost 20 years,” ANRA CEO Margy Osmond said.

Year-on-year the national accounts show cigarette sales dropped 0.9%, alcoholic beverages fell 2.5% and the hotels, cafes and restaurants lost 2.6%. Essential consumer items were less affected. Food rose 0.6%, clothing and footwear 1.7% and furnishings and household equipment up 1%.

“To a great extent food is recession-proof as people have to eat, and if they’re eating out less they’ll naturally spend more money on their weekly grocery shop,” Mrs Osmond noted.

“Households are saving a greater proportion of their income. The household saving ratio more than doubled in the last six months of 2008 to reach its highest level since the last recession,” she added. “Consumers are naturally hesitant to spend. Household debt is three times what it was during the last recession, super funds have taken a battering and home values are stagnating. It’s not surprising that people don’t feel as secure as they used to.”

Meanwhile, retail inventories fell $820 million a sign of a lack of confidence in the retail sector. “The massive drop in retail inventories is a clear sign that retailers are not replacing stock for fear of not being able to move it,” Margy Osmond said. “Australia is stuck in a crisis of consumer confidence with the natural reluctance of people to spend at a time of uncertainty compounding the pressures on our economy.”