RBA looking for a more realistic measure of spending
(23 September 2011 – Australia) Reserve Bank of Australia (RBA) Assistant Governor Philip Lowe said traditional measures of spending, like monthly retail sales figures could be understating the true strength of consumption.
He said Australians have sharply increased their spending on services in recent years even as they chose to save a lot more of their income, a trend that has hit the goods retailing sector particularly hard.
'Although households are saving a higher share of their income than in the past couple of decades, they have also been prepared to increase their spending on services quite significantly,' said Mr Lowe. 'As a result, conditions are quite difficult for many retailers.'
This shift in spending patterns was difficult to measure as there was little reliable real-time data on services. Markets have always used the retail sales report as a gauge of spending but it now only accounts for a third of consumption, down from 40 percent in the early 1980s.
While retail sales have been subdued for much of the year, household spending as measured by the gross domestic product figures proved surprisingly strong in the second quarter.
Mr Lowe said the RBA did look at a number of timely indicators including the number of litres of petrol sold; the number of domestic flights; the number of international flights; and the number of passengers on certain public transport networks.
'However, while these various partial indicators are useful, they fall well short of being a full substitute for comprehensive and timely measures of services consumption.'
'Although households are saving a higher share of their income than in the past couple of decades, they have also been prepared to increase their spending on services quite significantly,' said Mr Lowe. 'As a result, conditions are quite difficult for many retailers.'
This shift in spending patterns was difficult to measure as there was little reliable real-time data on services. Markets have always used the retail sales report as a gauge of spending but it now only accounts for a third of consumption, down from 40 percent in the early 1980s.
While retail sales have been subdued for much of the year, household spending as measured by the gross domestic product figures proved surprisingly strong in the second quarter.
Mr Lowe said the RBA did look at a number of timely indicators including the number of litres of petrol sold; the number of domestic flights; the number of international flights; and the number of passengers on certain public transport networks.
'However, while these various partial indicators are useful, they fall well short of being a full substitute for comprehensive and timely measures of services consumption.'
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