No last-minute Christmas spending spree for retailers, warns ANZ

Many shoppers did their Christmas buying in November, thanks to sales, and ANZ is predicting no last-minute Christmas spending spree for retailers in the last few days before December 25.

Retailers shouldn’t be holding their collective breath for a late spending boom in the final days before Christmas, as a spike in present purchases through November fuelled by Black Friday sales has brought forward shopping activity to have many Christmas stockings and trees full.

The ANZ has argued in its latest economics insight report that non-food retail spending has been soft so far in December, suggesting that the Black Friday bounce in spending reflected a shift in the timing of spending rather than an overall increase in spending.

And even though there are still a few days left to Christmas Day, including a full weekend of shopping, ANZ data points to no last-minute boom in spending.

“Households have faced higher interest rates, higher tax payments through bracket creep and higher prices due to inflation over 2023. This has led to a fall in aggregate discretionary consumption as seen through national accounts data, retail sales and our ANZ-observed spending data,” said ANZ senior economist Adelaide Timbrell.

“There has also been a shift to discretionary services spending and away from goods, which has hit the retail sector disproportionately.”

Santa with elves Ellie and Ellen walk among the shoppers in the Bourke Street Mall. Picture: David Caird

This week, NAB warned it believed consumers would be making forced changes to their spending intentions this Christmas, with six in 10 deciding to pull back on presents and holiday expenditures to counter the growing pressures on household budgets from cost of living pressures.

Most retailers book the bulk of their profits across Christmas, Boxing Day and the new year sales and any collapse in that sales momentum heading into Christmas Day could see some retailers struggling, or even collapsing, when the new year kicks off.

“Annual growth in ANZ-observed spending for key non-food retail categories was more negative in December than across the fourth quarter and the entire year in general,” Ms Timbrell said.

“This suggests spending has shifted into earlier periods, presumably due to longer discount windows in November.”

Ms Timbrell said the bank expects 2024 to be a year of “two halves” for households as those cost of living pressures that reared their heads in 2023 continue, but with the hope in the second half of the year of some tax relief and possible reduction in interest rates.

“The first half of the year will continue the impacts of higher rates, inflation and bracket creep. The second half of the year will be characterised by tax cuts from 1 July, potential for other fiscal easing, lower inflation and a rate cut in the fourth quarter. This will offset some of the negative impacts on real household incomes seen through 2023.”

ANZ is forecasting some monetary easing in Australia over 2024 that will be fiscal in nature first via tax cuts legislated to commence from July 1 followed by monetary policy easing in late 2024, most likely at the November meeting of the RBA.

“The return of annual inflation to the 2-3 per cent target band will be slow, although quarterly inflation should be annualising just within the band by the second half of 2024,” ANZ said in a recent economic insight paper.

“This should allow the RBA to begin a shallow easing cycle from late 2024. We don’t expect any further rate hikes from the RBA, although they are likely to retain a tightening bias through the first half of 2024.”