Election sees consumers reluctant to spend

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A warm winter and the upcoming federal election may be to blame for disappointing retail spending figures.

Retail spending rose 0.1 per cent in July, according to figures released by the Australian Bureau of Statistics (ABS) on Tuesday.

Economists had expected a rise of 0.4 per cent.

CommSec chief economist Craig James said the likely reason for the disappointing data was consumer caution ahead of the federal election.

A warmer winter may have also played a part, with less spending on heaters, blankets and other seasonal items, he said.

“Clearly the election has had a big influence in terms of slowing down the desire for consumers and businesses to spend,” Mr James said.

“We have to wait until the election is out of the road to see how the economy responds to low interest rates.”

CMC Markets chief market analyst Ric Spooner said while the figures were clearly below trend and suggestive of consumer caution, the election may not be to blame.

“While many are pinning hopes on a post-election turn around in sales, it’s not clear that elections feature prominently in the average decision on whether or not to buy a new pair of shoes or designer jeans,” Mr Spooner said.

RBC Capital Markets senior economist Su-Lin Ong said the July figures were particularly disappointing, given the schoolkids bonus, paid on June 30, was expected to have boosted retail spending for the month.

“We had expected this payment to boost, albeit temporarily, sales in July providing some offset to higher fuel prices, a mild winter, and lacklustre confidence,” Ms Ong said.

“Accordingly, the July outcome was particularly disappointing and underscored cautious consumers and their expenditure patterns.”

Australian National Retailers Association chief executive Margy Osmond said it was critical for the incumbent government to address consumer confidence and ensure they didn’t panic consumers to withdraw further spending.