Leading indicators for retail sales and household consumption expenditure in Australia

A leading indicator has been developed by foreseechange for retail sales volume growth.  It predicts turning points in growth for the following half year a month before the half year commences.  Leading indicators have also been developed for food retail volume and for the total of household goods, clothing, and department stores (HCD).  A leading indicator has also been developed for the broader household consumption expenditure volume growth, which includes goods and services.




The leading indicators are based on our measure of consumer willingness to spend and in some cases other variables are also included.  Consumer willingness to spend is one of a suite of measures in our Consumer Pulse tracking surveys.  These provide considerable insight into consumer behaviour as well as the predictive ability of the willingness to spend measure.

The Consumer Pulse indicators have been developed and tracked by Foreseechange every six months since 2003.  This follows several years of development.  The surveys are conducted nationally by telephone.  The sample size has been 1,200 per wave since 2010 and was 500 per wave between 2003 and 2009.

The next update will be in early June 2014, shortly after the May federal budget.  This update will provide a leading indicator for the July to December 2014 half year.

The consumer willingness to spend measure predicted, in April 2009, that household consumption spending growth would recover and so Australia would not fall into an economic recession in 2009/10.  By contrast, Treasury predicted in the May 2009 budget that Australia would experience a recession in 2009/10 but it did not happen.

This prediction was written about in the business sections of The Age and The Sydney Morning Herald on 30 April 2009, by Harold Mitchell.

As willingness to spend is measured via consumer surveys, the data can be analysed by demographic and by region.

The primary reason for soft consumer spending since mid-2010 has been an abrupt lift in consumer determination to build savings.  So, despite falling propensity to repay debt as interest rates have fallen, willingness to spend has not increased.  We augmented our November 2013 survey with questions to savers about the main item being saved for and when it was expected that enough will have been saved for that item.  The responses were most insightful, suggesting that large numbers of consumers were close to achieving their saving target, thus suggesting a potential pickup in spending quite soon.  These questions were repeated in our May 2014 and October 2014 updates.

The latest Consumer Pulse + Leading Indicators report will be available in early November 2014 and can be purchased from foreseechange.  It is based on a survey update conducted in October 2014.

Charlie Nelson
October 2014