The last 24 hours have seen the release of a sobering NAB report on its monthly business survey (Business conditions collapse in June, retail worst hit, says NAB) and the latest IMF World Economic Outlook, which has slightly downgraded China’s growth forecast but boosted Japan’s (Emerging Market Slowdown Adds to Global Economy Pains). With Japan being a major trading partner of Queensland’s, I’m hoping the better outlook for Japan largely offsets the slightly worse outlook for China.
Overall, in Australia, it’s starting to appear that there won’t be a smooth transition from the peak of the resources boom – i.e. other sources of activity won’t immediately substitute for mining investment which is starting to come off its highs. Part of the problem is the cautious consumer, as evidenced by a high household savings ratio (discussed in a previous post) and below trend household consumption expenditure (see chart below, based on the most recent Queensland State Accounts data, with my trend line in red).
While I was less concerned than many commentators about last week’s retail trade data, it is undeniable that consumer spending has been lower than might be expected based on an extrapolation of the historical trend. It’s hard to see what could boost consumer spending and thus inspire business confidence over the current financial year, so I expect 2013-14 will be another financial year of sluggish economic conditions.
Sorry Gene, but I do not understand the units of the graph. Is it saying in QLD, each household spent $9,000 per person over a 3 month period. (I.e. $3,000 per person per month. OR $9,000 per person per month over 3 months). Big difference. Could you please expand?
Whichever way, I acknowledge that I am the cautious consumer. Now that I actually have the time to spend, I am very cautious. Why?
> The glut from the boom is finding it’s way to the shelves in the op shops – vinnies, Red Cross, life line. And the volunteer service in the charity shops is far better than the disinterested service in David jones and Myers. It is simply to hard to buy things in the department stores.
> Health costs for the healthy are increasing and eating onto spare cash, health insurance has increased disproportionately to refunds, the gap has sky-rocketed, health screening costs are increasing.
> Insurance – as people become more cautious, insurances have also become more expensive and more extensive. Health, life, death and disability, income protection, trauma, home & contents, car insurance, third party, bike insurance, public liability, professional indemnity, funeral, mortgage, insurance, you name it someone will insure it ………
> superannuation – we are coming to realise this will become just another government rort, and will not be able to relied on for a comfortable retirement, so are madly saving and investing in other ways as well
> also, high Aussie dollar has produced a once in a life time opportunity for affordable overseas travel – the cautious consumer is waiting to spend on their overseas holiday.
Very good points, Katrina. Thanks for your question about the chart. It’s consumption spending per person over each quarter (three month period); it’s not in monthly terms. The latest quarter in the chart is the December quarter 2012 which includes October, November and December 2012. The quarterly figure of around $8,300 per person ends up being around $34,000 per person annually.
I trust you’ve been taking advantage of the still relatively high Aussie dollar.
Thanks for the explanation Gene. Very timely indeed. Subsequently it appears we are consuming slightly above average – I will need to implement some serious belt tightening to par back to your graph. Not as cautious as I thought .
I am not looking at the AUD until we return from holidays – I trust you will make every effort to maintain its relative high until then.
haha, just please don’t blame any belt tightening on my graph, in case upset business owners come after me.