catallaxy files

catallaxy in technical exile

Retail Sales, again

with 28 comments

Ash de Silva and I have been arguing all year that the cash splash was a waste of money (as was the rest of the stimulus packages). We have modelled ABS Retail Sales data to prove our point. We sent a paper off to a journal, but they didn’t like it, so we’re in the process of beefing up the empirical analysis to send elsewhere. The referees suggested that Treasury had correctly anticipated the fall-off in economic activity and filled the gap, so our no-real-difference result was due to superior economic forecasting. This despite the Treasury admitting they had not modelled the first cash-splash. Anyway, the ABS has put up new Retail Sales figures today. They have also, very quietly resumed publishing their trend data that they had stopped publishing last year.

What I have done is subtract the trend data from the seasonally adjusted data and then created a moving 12 month summation of the difference. Overall, I expect the moving 12 month summation to approximate zero. I then graph the moving 12 month summation.

Over the last year the 12 month summation has deviated quite substantially from zero. This might lead some to argue that this proves that the stimulus cash splashes have worked. The maximum, however, is a mere $2.9 billion – suggesting that consumers spent that amount more than the trend would have suggested over a 12 month period. But the totality of the cash splash was $23 billion.

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Written by Sinclair Davidson

January 7, 2010 at 4:33 pm

Posted in Uncategorized

28 Responses

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  1. On the upside, Australia now has some of the world’s best memorial toilet blocks.

    C.L.

    January 7, 2010 at 5:00 pm

  2. Sinc, is there evidence that personal debt was reduced or savings increased? I believe that happened in the US and seems a rational response to uncertainty.

    Ken Nielsen

    January 7, 2010 at 5:10 pm

  3. One of the series that we’re looking at is savings.

    Sinclair Davidson

    January 7, 2010 at 5:13 pm

  4. What do you mean by wasteful?

    It could be argued that the cash splash was equivalent to a (temporary) tax cut. Tax cuts are generally a good thing since people get to spend their own money according to their own preferences. So on that basis, I don’t see how the cash splash was a waste.

    This would not apply in relation to the spending on pink batts and school toilet blocks – I doubt that this reflected actual consumer preferences. Indeed, it was obviously based on political considerations.

    Also, if the intention of the spending was to avoid recession, it failed. Per capita GDP has not increased for five consecutive quarters.

    Capitalist Piggy

    January 7, 2010 at 5:50 pm

  5. you do not need a model to have known a hard rain was gonna fall.

    David Gruen said as much at the Senate Hearings.

    Retail trade rises dramatically with the cash handouts and then flatlines when most of it is spent. wow who would have thunked it.

    Only [I have constantly warned you on this point, Homer. Please respect my wishes, Sinc] would believe the only spending was on toilet blocks. Much more on buildings actually.

    Gee we are still in recession .time to tell the people, RBA ,Treasury.
    , IMF, OECD
    They don’t think so

    Butterfield, Bloomfield & Bishop

    January 7, 2010 at 6:00 pm

  6. So the original objective to get people to spend more was actually a miserable failure despite Ken Henry’s fierce advice to the other two economic illiterates (rudd and Swandive) “to go big and go household”.

    How did that advice turn out Ken?

    jc

    January 7, 2010 at 6:02 pm

  7. That’s Ken Henry .. I mean.. not Ken N of course.

    jc

    January 7, 2010 at 6:02 pm

  8. “It could be argued that the cash splash was equivalent to a (temporary) tax cut.”

    A temporary, unpaid tax cut.

    “Gee we are still in recession .time to tell the people, RBA ,Treasury.
    , IMF, OECD
    They don’t think so”

    …and the SMH called Ken Henry a winner of 2009 for saving us from doom. The reality is not so rosy:

    http://blog.libertarian.org.au/2009/12/16/australia-still-in-recession/

    “In the last five quarters, GDP/person has been -0.4%, -1.4%, 0%, 0%, -0.4%… which seems to indicate that we are still not out of recession. Or perhaps (if you count 0% as positive) that we could be facing a double-dip recession.”

    Semi Regular Libertarian

    January 7, 2010 at 6:05 pm

  9. Yikes:

    Is the liquidity party about to called over?

    SHANGHAI — China’s central bank unexpectedly raised a key interbank market interest rate Thursday for the first time in nearly five months, signaling a change in its policy focus toward pre-empting inflation risks in the new year.

    jc

    January 7, 2010 at 6:06 pm

  10. Could be an upside for US manufacturing and exporters?

    Semi Regular Libertarian

    January 7, 2010 at 6:07 pm

  11. Jeez, thanks for making that clear jc.

    Ken Nielsen

    January 7, 2010 at 6:11 pm

  12. You mean because of a weakening Dollar? The Big Buck is actually strengthening on the news.

    The problem, SRL is that the currency fix is totally dysfunctional with sometimes perverse results.

    jc

    January 7, 2010 at 6:13 pm

  13. Much like Obama’s attempts to rig the bond market.

    Semi Regular Libertarian

    January 7, 2010 at 6:17 pm

  14. SRL

    Heard this last night:

    An interesting tidbit I’ve heard from a friend with inside knowledge of thinking inside the Fed is that the Central bank likes to hear chatter about future inflation potential around the street without there being any CPI based inflation in the system. The reason is that they want to see the long end of the bond market go higher with the effect of a steepening slope so that the banking system makes more money as a result.

    jc

    January 7, 2010 at 6:23 pm

  15. Retail Sales;

    The perfectly, sensitive flat screen TV for lefties who always want to be thinking about endangered species, even when watching cooking shows.

    http://www.theaustralian.com.au/news/gallery-e6frg6n6-1225816943423?page=2

    jc

    January 7, 2010 at 6:28 pm

  16. That is ugly

    tal

    January 7, 2010 at 6:32 pm

  17. Don’t tell me Tal as you preaching to the unconverted.. Perhaps the manufacturer could be persuaded to make a wombat style one……. for Ken Henry.

    jc

    January 7, 2010 at 6:34 pm

  18. Maybe his Mum could knit the cover for him

    tal

    January 7, 2010 at 6:37 pm

  19. “SHANGHAI — China’s central bank unexpectedly raised a key interbank market interest rate Thursday for the first time in nearly five months, signaling a change in its policy focus toward pre-empting inflation risks in the new year.”

    The odds of a double-dip recession in Australia have just increased: lower demand from China, stimulus money running out, interest rates going up, falling (collapsing?) business investment, and slowing money supply growth rates.

    Capitalist Piggy

    January 7, 2010 at 7:09 pm

  20. you heard it here first people we are still in recession.
    it would be good if people actualy lived in the real world.
    without the stimulus then the Expenditure side of GDP would have stayed at the levels of the other two.
    Hmm what do you call 4 quarters of negative growth.

    In Germany that is called a Recession.

    Butterfield, Bloomfield & Bishop

    January 7, 2010 at 7:52 pm

  21. Collapsing business investment. Have you actually looked at the New Private capital expenditure figures.

    No didn’t think so

    Butterfield, Bloomfield & Bishop

    January 7, 2010 at 7:53 pm

  22. In Germany that is called a Recession.

    always with Germany. The fatherland is never too far away for von Homer.

    jc

    January 7, 2010 at 8:02 pm

  23. I have always preferred the German version but then I knew of it.

    The two quarters of negative growth is a poor example of a recession.

    One cannot argue without the stimulus we would have had 4 quarters of negative growth and sinkers could have had the recession he was praying for

    Butterfield, Bloomfield & Bishop

    January 7, 2010 at 8:13 pm

  24. “Collapsing business investment. Have you actually looked at the New Private capital expenditure figures.”

    Yes I have, have you?

    More worrying than the ABS data, is the more current data on business credit published by the RBA. Check out columns Q and R.

    Capitalist Piggy

    January 7, 2010 at 8:29 pm

  25. The ABS warns users of the retail trade data NOT to use the difference between the trend and seasonally adjusted measures as a measure of the impact of the stimulus.

    Also, retail trade in this publication is only 40% of total consumption as it does not cover motor vehicles and a wide range of services.

    Mark U

    January 8, 2010 at 8:46 am

  26. Mark U – sure they do. 🙂 I would hope that if and when the chief statistician fronted up to the Senate that one of the opposition senators would have the balls to question him closely on the ABS retail sales series and why the ABS discontinued and then recontinued their trend series. I’m not holding my breath though.

    On the measure of retail sales, it was the government and its proxies who first politicised it not me. Now when it doesn’t support their arguments anymore we hear nothing of it.

    Sinclair Davidson

    January 8, 2010 at 10:27 am

  27. One cannot argue without the stimulus we would have had 4 quarters of negative growth and sinkers could have had the recession he was praying for…

    It’s worth remembering that Homer still praises Keating for giving us the worst recession and the worst unemployment since the 1930s. It was the recession “we had to have.”

    C.L.

    January 8, 2010 at 10:44 am

  28. Water-boarding the numbers.

    GDP is usually reported in real terms, i.e. adjusted for inflation, though the ABS also publishes GDP (seasonally adjusted) in current prices. Current prices GDP fell for three successive quarters from the Sept Q 2008 to June Q 2009, then grew modestly in the Sep Q 2009 (0.2%).

    More statistical trivia:
    In annualised terms, current prices GDP fell by 2.5% to the Sep Q 2009. So? Well, at no time in the past 50 years has annualised current prices GDP ever fallen by such an amount. Even during the 1991 recession “we had to have”, the worst outcome was a drop of 0.4%.

    Last one:
    In the Dec Q 2008, gross disposable income increased by 8.6% (inflated by the cash splash) while final consumption expenditure increased by only 1.7%, a gap of 6.9pp – the largest gap ever reported in 50 years.

    Capitalist Piggy

    January 8, 2010 at 2:45 pm


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