Interest rates cuts that helped boost retail sales in Australia over the past two months have already worn off. Economists expected a further rise in sales this month only to see a seasonally adjusted .8% decline.
Retailers hope the biggest monthly drop in consumer spending in nearly two years will trigger alarm bells at the central bank when its board meets to discuss interest rates.
Retail trade fell by a seasonally adjusted 0.8 per cent in July to $21.4 billion, after being bolstered in the previous two months by government handouts and earlier interest rate cuts by the Reserve Bank of Australia (RBA).
Economists had expected an overall spending rise of 0.2 per cent in the data collected by the Australian Bureau of Statistics.
But department stores’ sales slumped 10.2 per cent, the largest fall since April 2005.
Understatement of the Day Award
The understatement of the day award goes to Macquarie Research divisional director Brian Redican who said “The headwinds for growth may be building more rapidly than analysts or policymakers have been expecting.“
More Retail, Food Store Bankruptcies
The Age reports Food, fashion jobs in jeopardy as companies collapse
In another blow to Australia’s already shaky retail sector, women’s fashion chain Ojay and a ready-to-eat food manufacturer have reportedly been put into administration, threatening hundreds of jobs nationwide.
Food jobs also in jeopardy
It was reported early this afternoon that Australian Convenience Foods Group, which makes sandwiches for petrol stations and supermarkets, had collapsed.
Deloitte has been appointed managers of the company, with up to 400 jobs at risk. The company’s history goes back to the 1970s. A receptionist at ACF’s office confirmed the company had collapsed.
Australian Convenience Foods fell into voluntary administration on August 28 and Deloitte is currently running a sale process to sell the business as a going concern to a new owner. Expressions of interest for buyers close tonight.
Commodities and Housing Bust
In Australia the Unlucky Country Variant Perception states the case for a substantially weaker Australian dollar based on a slowdown in China and a busting of the housing bubble.
That is right in line with the case Michael Pettis has presented in regards to his prediction of a major slowdown in China.
Wrapping up the disaster in Australia, please see Michael Feller’s synopsis on Macro Investor Being a Bear is Not “unAustralian”.
Peruse the Reserve Bank governor’s recent remarks to the senate or listen to the commentariat on talkback radio and it would seem that Australia’s economy has become victim of nothing more than an insidious rogue gloom-and-doomerism that threatens to hurt the nation, or worse.
At its worst, this anti-half-glass-empty rhetoric smacks economic McCarthyism. Shooting the messenger is as old as politics itself, but in what we like to consider an open, pluralistic society, let alone the 21st century, we should demand a higher standard of debate.
Saying that Australia has unusually high house prices, has a banking system vulnerable to external shocks, relies too much on a cyclical and temporary mining boom, or carries far too much household sector debt is not unAustralian, it is patriotic. And calling on policymakers to do something about our vulnerabilities is not negative behaviour, nor does it diminish our otherwise very obvious achievements, it is prudent.
The bears, the doom-mongers, the chip-kickers, the Hanrahans and the whingers aren’t a bunch of lazy bludgers, jeering from the sidelines, they are the people who are cognisant of the very real risks to the Australian economy. Many of them merely believe that while Australia’s economy is great, and its stewardship has been largely competent, even a perfect work of machinery can have its flaws and it would be remiss to ignore these if they can damage the whole.
Although it’s probably too late to implement policies that would have had us squirrel away some of the boom for a rainy day – a boom that Rio Tinto’s CEO now denies ever existed – and although it’s probably too late to diversify our trade balance before China stops building surplus fixed inventory, it’s not too late to reshape our economic conversation before we face the next challenges, opportunities and threats as an economy and as a society.
It’s Too Late
The housing bubble cannot be undone, it can only crash. Retailers will continue to go bust because they overpaid on property or leases relative to demand. Excessive mortgages will make debt slaves out of many Australians for life.
The over-investment in base metals based on a silly belief China could grow 10% a year forever has yet to play out (but it will).
Does anyone understand exponential math? It seems not. Even if peak oil was not an issue, it is virtually impossible for China to maintain the growth rate most analysts expected.
No one listened to Steve Keen, me, and other bears when there was time to limit the damage. It’s far too late now. Time has expired and any efforts to reignite the boom can only make matters worse.
Mike “Mish” Shedlock
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