Guys you might find this article and how it relates to retail sales (JBH) interesting ....
It must also be remembered that inflating prices in other staple goods and services are likely to result in consumers having less money to buy JB products, placing a downward pressure on sales....
A RENTAL squeeze, coupled with higher interest rates, is driving the consumer-led downturn in the Australian economy.
Economists singled out soaring rents as one major factor for a pullback in spending after the latest data on retail sales showed a fall in spending during the March quarter, with predictions of more weakness ahead.
"It's due to the rate hikes and also the sharp rise in rents," Westpac chief economist Bill Evans said.
"People are being squeezed on the rental front as well as on the interest rate front.
"It's a new phenomenon: in the past consumers have generally been squeezed by higher interest rates and weakening jobs, and now we're seeing higher interest rates and rents."
With a third of Australians in the rental market, consumers are now at the forefront of the economic slowdown.
"The consumer will play a bigger role in this downturn than they have in previous downturns because housing will be relatively resilient, given the large shortage of houses that we have at the moment," Mr Evans said.
The real retail sales figures revealed a sharp drop in volumes during the March quarter, down 0.1 per cent.
"That's a pretty sharp downturn from the 1.3 per cent (rise) that we had in the fourth quarter of last year," Mr Evans said.
Nominal retail figures grew by 0.5 per cent for the month of March, beating forecasts for a 0.3 per cent rise, after a 0.1 per cent fall in February.
But economists said the number would have been much weaker without the key driver of higher food prices.
"If you extract food prices, which is very strong, just about every category was down in March," JPMorgan chief economist Stephen Walters said.
"There's been huge rises in food prices, but volumes are plunging in everything else; it would have been down 0.3 per cent if you take food out."
The Australian dollar briefly rose to an intra-day high of US93.40c after the data's release, while money markets priced in a 10 per cent chance of a rate hike at next week's Reserve Bank meeting.
Although the RBA was expected to put rates on hold, a turnaround in spending was possible in the September quarter following the July tax cuts, analysts said.
"That's where we'll have concerns on the interest rate outlook because the Reserve Bank is sitting back, realising the rate hikes have started to do their trick and yet you've got all this stimulus coming through at the end of the year," Mr Walters said.
ANZ chief economist Saul Eslake said while the chance of a rate hike later in 2008 was less than half, the RBA would watch the numbers closely.
"Could it be that the (expected) tax cuts trigger a rebound in consumer spending? And that's a reason not to cut rates, because that could happen," Mr Eslake said.
"If that does happen, and particularly if it's accompanied by a further acceleration in inflation, then a further hike could be on the agenda."
Retail data would most likely continue to weaken in the meantime, with weaker sales figures expected for the June quarter.
"You wouldn't expect to get two negatives, but I think it will be another very weak number, probably less than half a per cent," Mr Evans said. "That's going to start to show a substantial slowdown in consumer spending which is obviously what the Reserve Bank wants to see."
Mr Walters said he expected the retail figures to be more negative in the next quarter with several factors set to eat into consumer spending, on top of the recent RBA tightening.
"We've had all the big banks raise interest rates more; there's speculation that rates may go up again during April after the CPI data; we've had petrol prices at $1.50 a litre; we've had equities under pressure and consumer confidence plunging as well as talk of a US recession," Mr Walters said.
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