Economy didn’t hit the wall in December as consumers kept spending

Retail spending in December, as measured by the ABS, was easily the highest in any month ever at $44bn. Picture: Chris Pavlich

There are liars, damned liars, and statistics. Then there are economists utterly unable to analyse those “statistics”.

No, the economy did not hit the wall in December.

No, consumers didn’t slash their spending – either by choice or because savage increases in power bills and interest rates had emptied their wallets, real or virtual.

In fact, retail spending in December, as measured by the ABS, was easily the highest in any month ever at $44bn – a thumping 16 per cent leapt on November and 8 per cent on December of 2021.

Yes, the rise December-December was only broadly in line with the 7.8 per cent inflation over the year.

But that was actually a good news story – it meant consumers maintained their level of real spending at what had itself been a very high number at the end of 2021, as they came roaring out of the last (we hope) of the lockdowns in our two biggest states, NSW and Victoria.

So hang on, what was that supposed 3.9 per cent plunge in retail spending, reported so dolefully right across the media – print, TV and radio?

That was the seasonally adjusted number. I’ve given you the actual original dollar spends from the ABS.

Obviously, December has always been the big spend month; seasonal adjustment makes analytical sense to try to give a guide to the real underlying dynamics and direction of consumer spending.

But as the ABS itself admits, the normal consumer spend running up to Christmas now actually starts early in November with Black Friday’– in store and online. It now essentially runs for two whole months, not just December and especially Boxing Day as before.

That’s to say, the ABS’s seasonal adjustment process now sits somewhere between “wonky” and broken.

The more analytically sensible thing to do, is to put November and December together.

Over the two months, (actual) retail spending added to a thumping $82bn – up a hefty 17 per cent on September-October and an even more telling and impressive 8 per cent on the same two months of 2021.

Perhaps the most analytically informative comparison is with the last pre-Covid Christmas.

Spending this November-December was actually up a massive 25 per cent on November-December 2019.

Just let that number sink in – that massive 25 per cent surge in retail spending over the three years was double the 12 per cent aggregate inflation over the three years. In short, emphatically and undeniably, far from hitting any sort of wall, consumer spending was booming through November-December.

To have to state this is a depressing commentary on the quality of both so-called experts and media analysis.

Apart from anything, are these people unable to believe their own lying eyes?

Were they incapable of noticing crowded airports, holiday resorts, actual you know, stores, to say nothing of restaurants and so on?

Were they able to read – and understand – JB Hi-Fi telling us sales growth was strong “throughout” (my emphasis) the December half, running up 8.6 per cent?

Or even Myer, in the secularly challenged department store space, telling us that its actual department store sales were up nearly 9 per cent in the six weeks to Christmas Eve, compared with the same (post-lockdowns) six weeks of 2021.

There’s a parallel inanity in the “expert” and media hysteria over “plunging” property prices; with the latest the breathtaking news that they had fallen another 1 per cent in January.

I could take two columns to explain why that’s an utterly bogus measure of anything real, especially in January, not exactly a key month for property sales.

Yes, clearly, property prices are in very broad terms off their peaks, but they are also still double what they were 10 or so years ago. Just not double and a bit.