The sa volume of retail sales peaked in Q4 2008. This morning’s release for December completes the 2008 picture. There were qoq falls from Q1 to Q4 of 1.8%, 3.3%, 1% and 2.2%. The Dec figure was 8% below Dec 2008.
The quarterly national accounts, available only to Q3 2008 anyway, do not give the income table, and we can only guess at the intra-year patterns. If consumption has followed retail sales volume, there must have been a sharp increase in the savings rate through 08. Household income cannot have fallen anything like 8%, and even in Q4 it is doubtful if the income decline was as much as the 2.2% quarterly fall in retail sales volume. The direct tax increases had not kicked in, and many enjoyed nominal pay rises from September as consumer prices began to fall, offsetting the income loss from employment contraction. Household income will possibly fall more rapidly in Q1 2009, since unemployment seems to be rising faster; direct tax hikes are kicking in; and there seems to be a pay-reduction round going on in the private sector. If the savings rate continues to rise, the implication could be dire retail volumes for a while yet.
Here’s a question: the figures coming out since year-end have been pretty poor overall, suggesting that activity is declining even faster than feared. Does this mean that the downturn could be shorter? Is it the case that there is a given (given by world trade volumes, real exchange rate and competitiveness) macro-correction of x% to be endured, but x does not get bigger just because the economy gets through it faster?