Consumers keep rein on spending
THE disappointing news for retailers looks set to continue, with the latest credit card data over the holiday period showing spending rose only modestly from the year before.
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.