Consumers keep rein on spending
The analysis, of more than three million Commonwealth Bank cardholders' transactions, came as Westpac said its consumer sentiment index rose just 0.6 per cent in January from the month before.
Consumers remained relatively cautious in the 11 weeks to January 4 despite interest rate cuts, boosting their Christmas spending by only 4.2 per cent on a year earlier, the data showed.
"Given this is nominal spending rather that real spending (inflation adjusted), it highlights the tough environment faced by the retail sector," analysts Andrew McLennan, Sam Teeger and Savanth Sebastian said.
The data revealed consumers were spending more on necessities but barely more on discretionary items, with nominal sales rising only 1.5 per cent. Spending on food and liquor rose 10.8 per cent compared to the year before.
"If inflation was taken into account it would suggest that real discretionary spending actually went backwards during Christmas 2012 compared with a year ago," the analysts said. "And given the buzz and interest around Christmas retail activity, the lack of discretionary spending really speaks volumes about how tough the retail sector is doing it at present."
The Boxing Day sales transactions, which were up 20 per cent from 2011, also meant consumers were attracted to heavily discounted items, the analysts said.
The strength of the Australian dollar played a part, with some consumers buying items directly from overseas sites, they added.
Meanwhile, Westpac said the case for further interest rate cuts was strengthened despite the slightly positive results in its consumer sentiment index for January.
Frequently Asked Questions about this Article…
Analysis of more than three million Commonwealth Bank cardholders' transactions showed only a modest rise in holiday spending, with Christmas spending up 4.2% year‑on‑year in nominal terms — a sign that consumers were cautious over the period.
Westpac reported its consumer sentiment index rose just 0.6% in January from the month before. While a small uptick, Westpac said the results strengthened the case for further interest rate cuts even though consumer sentiment remained relatively muted.
Consumers shifted toward necessities: nominal sales on discretionary items rose only 1.5%, while spending on food and liquor increased 10.8% year‑on‑year, indicating shoppers prioritized essentials rather than higher‑margin discretionary purchases.
Analysts Andrew McLennan, Sam Teeger and Savanth Sebastian noted that the figures are nominal (not inflation‑adjusted), and when inflation is considered real discretionary spending may have declined — highlighting how tough conditions are for the retail sector.
Boxing Day transactions were up 20% from 2011, suggesting consumers were drawn to heavily discounted items. That pattern points to bargain hunting rather than broad increases in full‑price retail demand.
Yes — the stronger Australian dollar encouraged some consumers to buy directly from overseas websites, which can reduce sales for domestic retailers and shift where spending occurs.
Cautious spending, weak discretionary sales and a shift to discount or overseas purchases signal pressure on retailers' margins and sales growth. Everyday investors should note the article's takeaway that the retail sector was facing a tough environment amid only modest increases in nominal holiday spending.
According to the article, consumers remained relatively cautious in the 11 weeks to January 4 despite interest rate cuts — Christmas spending rose only modestly — and Westpac said the case for further cuts was strengthened, implying cuts had not yet produced a clear spending surge.
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