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Australians snap up cars and homes in fillip to economy
[SYDNEY] Australians are spending more on household items, cars and new homes in a sign that the consumer sector maintained its momentum into the new year after lifting the whole economy in the fourth quarter.
The latest data from the Australian Bureau of Statistics released Friday showed retail sales rose 0.3 per cent in January, from December, to be 4 per cent higher on the same month last year.
That total does not include online sales but the ABS has an experimental measure, released with the retail spending report, that showed annual growth speeding along at 10.5 per cent.
The pick up in consumption has allowed the economy to shake off the drag from mining and grow 3 per cent in the last quarter of 2015, above even the most optimistic forecast.
Household spending accounts for 56 per cent of Australia's A$1.6 trillion (S$1.63 trillion) annual economic output, mining less than 9 per cent.
The retail industry alone generates A$290 billion a year and is the second biggest employer with 1.25 million workers.
All of which lends credence to the Reserve Bank of Australia's (RBA) long-held stance that consumers would eventually shake off worries about the global outlook and save less and spend more.
"The transition to non-mining activity is occurring, with the household sector driving the recovery," said Felicity Emmett, head of Australian economics at ANZ.
"In particular, the RBA would be more comfortable with its forecast for a pick-up to above trend growth in consumer spending."
Markets have responded by scaling back bets on a cut in interest rates. Interbank futures put the chance of a May easing at 34 per cent, down from 60 per cent early this week.
Australians certainly seem confident enough to splash out on big ticket items, with new cars speeding off the lots.
Sales of new vehicles in both January and February were records for those months. February sales alone were 6.3 per cent higher than a year before, with sports utilities reaching annual growth above 15 per cent.
Australians spend around A$20 billion on vehicles annually, equal to almost 9 per cent of household consumption.
There was also a notable pick up in sales to businesses. Purchases of light commercial vehicles rose almost 33 per cent in what could be a harbinger of a much-needed revival in business investment outside of the mining sector.
New homes were also in demand, with sales up 3.1 per cent in January from the previous month. New homes need new stuff, which is why household goods retailers raked in over A$51 billion in the past year.
One beneficiary was homewares chain Harvey Norman whose stock hit nine-month highs after reporting a 30 per cent jump in half year profits.
"We anticipate robust construction and housing activity to continue this year in response to pent-up demand," the company commented in its upbeat outlook.