Consistent strength for the Australian retail sector.

A retail analyst at RNCOS, a Delhi based research and consulting firm, says the following about Australia's retail sector: "The retail industry in Australia is among the world's fastest growing industries."

Reacting to Australian Bureau of Statistics (ABS) reports of August 2007 sales increases, the analyst added, "Although the forecast by industry experts for overall sales in August 2007 was positive, the actual consumer demand and spending sent sales soaring way above expectations."

According to the most recent ABS statistics, retail sales also increased in September 2007, and the growth trend, depicted in the graph above, shows no signs of moderating anytime soon.

"Spending has been robust for a very simple reason," says a report from Economics@ANZ, the economics research division of the Australia and New Zealand Banking Group Limited (ANZ) (Melbourne) "household disposable incomes after tax and interest have been rising rapidly, and households have not displayed much inclination to save for a rainy day."

The above graph plots the rate of growth of retail sales (white line) for a period of 14 months, and automotive sales (yellow line) for a period of 15 months ending in October 2007. According to ABS, retail sales--and, obviously, consumer spending--have been growing continuously for a much longer period--16 years.

Note that the seasonal variations in rate of growth for both measures are vividly illustrated--for example with December retail sales growth soaring and automotive sales growth dipping. This is what one would expect from a holiday sales period.

More to the point of discussing monthly retail and automotive sales here is the very steady average growth of these measures. A trend line drawn through the retail sales graph (not shown) does slope downward, but almost imperceptibly. A trend line drawn through a graph of monthly change in automotive sales is dead flat.

A trend line drawn through a graph of the raw retail sales figures from ABS (also not shown) has a clear upward slope.

From statistics supplied by ABS to analyses from normally quite reliable research sources to our own analyses, the conclusion that consumer spending in Australia, is and will continue to be for the foreseeable future, a major source of vitality for the economy as a whole.

The fact that automotive sales show a trend similar to that of overall retail sales is especially impressive. Strong, predictable automotive sales are normally taken to be an indicator of a healthy consumer sector.

The report from ANZ does, however, identify some areas for concern. The most notable is the pressure strong retail exerts on prices. In recent years, inflation has been pretty much under control. In 2006, according to International Monetary Fund (IMF) statistics the change in the annual rate of inflation was 3.5 percent. For 2007, the IMF estimates the rate of inflation will grow 2.3 percent. And for 2008, the inflation rate will increase 2.8 percent.

ANZ says, "The good news is that real disposable incomes will continue to increase, with tax cuts and continued growth in employment and wages more than offsetting the negatives of higher interest rates and inflation."

On the point of interest rates, ANZ references "tough talk" by the Reserve Bank of Australia (RBA). Opinion is united that interest rates will increase soon.

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