Shoppers Keep Wheels Turning
The Age
Thursday September 4, 2003
Canberra
Exuberant consumers went on a shopping spree in July as business production continued to run in top gear, confirming that the slowdown in economic growth in the previous three months was an aberration.
As the Reserve Bank yesterday revealed its intention to leave interest rates on hold, new figures showed retail sales grew by a stronger than anticipated 0.8 per cent in July to $15.12 billion. Shoppers spent an extra 2 per cent on food and 2.3 per cent more on such household goods as paint, carpet, furniture, curtains and hardware.
The retail jump came the day after economic growth figures showed the economy expanded by just 0.1 per cent in the three months to June, the second worst growth rate for a decade. Despite this disappointment, the Reserve held its official interest rate at 4.75 per cent, marking the second-longest period of interest rate stability since 1990.
Economists said that was the most sensible decision because cutting mortgage rates would add more fuel to Australia's overheated property sector, exacerbating household debt problems.
Last week Reserve deputy governor Glenn Stevens warned that the high level of household debt left Australia vulnerable to economic shocks. He pointedly suggested a rate cut would help in the short term but could do damage in the future.
An important indicator of manufacturing growth also yesterday suggested that the Australian economy was set to pick up in coming months, as the effects of the drought faded and the world economic environment improved.
The survey of 200 manufacturers from Westpac and the Australian Chamber of Commerce and Industry revealed that companies were producing at the top of their limits, with record capacity utilisation and a surge in forward orders pointing to more production in the pipeline.
Westpac global head of economics Bill Evans said the results were surprisingly strong and suggested a flurry of activity ahead.
``Our composite measure of expectations for new orders, output and employment reached record levels and is indicating a very strong final quarter in 2003," Mr Evans said.
The retail figures showed that spending in Victoria grew by a robust 1.5 per cent, suggesting the particularly weak June quarter may not have been serious.
© 2003 The Age