Australia’s consumer spending is slowing and the outlook is grim for the economy, according to the latest data from the Reserve Bank.
Key points:The consumer spending picture is still improving, but growth is lagging behind growth in previous quartersKey points A drop in retail sales has taken its toll on the economy since the global financial crisisThe economy contracted by 0.6 per cent in the December quarter and by 1.2 per cent for the January quarter, the latest quarterly figures from the ANZ Bank show.
A further 0.4 per cent contraction was forecast for the February quarter, a contraction that has continued into March and April.
However, the quarterly numbers do not include consumer spending from goods and services that are exempt from GST and other tax rates.
The Australian Bureau of Statistics (ABS) has forecast the economy will contract by 1 per cent this year, while the Reserve said growth was lagging below the 1.3 per cent growth forecast in the June quarter.
“The economic outlook remains bleak,” the bank said.
Despite the deterioration, consumer spending growth in the January and February quarters was up.
But that growth is still “in line with a 2.5 per cent year-on-year increase in consumer activity”, the bank noted.
Its key economic indicator, the consumer price index, is expected to expand by 0,2 per, on a year-over-year basis in the coming months.
It is also down on an average of 1.4 percentage points since the June quarters.
Australia’s consumer inflation is forecast to be about 2.4 points higher this year than the June period.
While the data shows the economy is contracting, the economy has been growing.
Inflation is predicted to be 1.6 percentage points lower this year and 3.5 points higher than the last quarter.
A decline in consumer confidence and a decline in household spending has been taking its toll since the financial crisis.
And this is the first quarterly update in nearly three years, and the latest to show a significant drop in the economy.
Data released by the Reserve in September showed consumer confidence has dropped to a five-year low, while household spending was also down.
Growth in the April quarter was predicted to decline by 0-1 per cent and by 2.7 per cent next year, according a Reserve report on Wednesday.
On Wednesday, the Australian Bureau’s economists forecast the Australian economy would contract by 2 per cent, its slowest growth since the April recession.
Last week, the ABS also forecast the consumer spending decline in the March quarter to be negative for the first time since June 2014.
There were also signs of a drop in investment spending, which is often a key driver of growth in a downturn.
At the start of the month, consumer credit rose by just 0.7 percentage points.