We’re spending like drunken sailors.
According to the latest data, Aussies have been putting millions of dollars through the tills at shops like JB Hi-Fi and Harvey Norman over Christmas and the Boxing Day sales.
And it’s very hopeful news for the economic recovery in 2021.
As the next chart shows, we’re spending almost 40 per cent more on stuff for our houses – electronics and sofas. That’s the fastest growing category as we settle in to life at home.
The second-fastest growing category is bottle shops. Seems like for a lot of us, summer has meant buying a new 80-inch TV and sitting in front of it slowly getting sozzled.
REMEMBER THE RECESSION?
Reminder: we are supposed to be recovering from a recession. 2020 had the deepest recession Australia has seen in many decades. A big decadent orgy of consumer spending is not what you’d expect.
But consumer confidence is at its highest level in a decade and Aussies have been topping up their bank accounts during the last year. We feel rich thanks to the money flowing around the economy due to JobSeeker and JobKeeper payments.
Some parts of the country feel richer than others, of course. The policy response is national but of course the virus impact is regional. Some places are whooping it up, getting the stimulus but little downside.
Like Western Australia. Just check out this chart, which shows how much has been spent at bars and pubs compared to the same week the previous year. West Australians have basically been partying all year, and it kicked up to a new fever pitch in the first weeks of January.
JB Hi-Fi is turning into Australia’s most successful retailer. Sales have doubled in the last five years as they took over The Good Guys and moved into selling more fridges and microwaves. Profits were up heavily in 2020 despite some stores being closed and the spending data we are seeing in early 2021 hints conditions are even more promising now.
JB Hi-Fi’s stock price has been going very well. If you invested $1000 into the company back in the early days of the pandemic, back in March, you’d have over $2000 now.
CHRISTMAS WAS SAVED
The lift in spending in early 2021 answers a big question we had about the economy – would Aussies feel confident enough to spend over Christmas? And was the Boxing Day sale dead now?
The recent trend has been for a burst of spending in November. People buy things online which take a while to be delivered so Christmas shopping has moved earlier. Retailers have encouraged this with their Black Friday promotions in November. Christmas shopping has been weaker in recent years and Boxing Day has been lacklustre.
It seems there was no such problem in 2020-21. Spending in the two weeks after Christmas was 14 per cent stronger this time than last time, according to CBA card data. We managed to spend more despite the absence of traditional summer spending traditions like travel, live music and going to bars. Almost all the spending growth was on actual goods – food, booze, electronic toys, furniture and clothes.
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The lack of travel spending might in fact be a big part of it. Usually, a million Australians go overseas in January. This year we’re all here instead, spending money at home instead of in Bali, NZ, Japan, and Europe. But however you explain it, it’s very surprising.
So will the uptick in retail spending continue? Can Harvey Norman and JB Hi-Fi expect the tidal wave of money to continue sloshing in through their front doors? The answer is: we hope not.
Sarah Hunter from BIS Oxford Economics says the current pattern of spending should be temporary. Eventually we will go back to spending more on experiences instead of things.
“Looking ahead, spending patterns will continue to normalise towards their pre-COVID pattern, particularly once the vaccine has been rolled out and the uncertainty over outbreaks prompting further lockdowns diminishes,” she said.
“This will benefit cafes, restaurants and clothing, and will weigh on household goods and food, both of which have been disproportionate beneficiaries over the last year …. More broadly, there is also likely to be a shift back towards spending on services, particularly travel and tourism; as a result, after a comparatively strong 2020 we expect growth in retail turnover to lag behind total household spending in 2021.”
Even drunken sailors have to sober up some time.