Falling online sales growth shows just how worried consumers are: Bartholomeusz

The latest National Australia Bank index of online retail sales confirms a developing trend. The rate of growth in online sales is slowing as the risk aversion of consumers rises.

While still strong, at 14% in May relative to a year earlier, the growth in online spending has been dropping steadily as this year has progressed. In April the index showed year-on-year growth of 15%, which was down from the March growth rate of 19%. A year ago online sales were growing at 42%.

Traditional retailers, of course, would kill for double-digit sales growth. They are experiencing flatlining sales at best and enormous pressure on their margins. A factor in the slowing of online sales growth has been the significant problems being experienced by electrical goods and appliance retailers, where consumer caution has been most evident.

Consumers do have good reason to be anxious. While Europe is slightly calmer after last week’s leaders’ summit, it remains teetering on the brink of something quite unpleasant.

Domestically, housing prices continue to slide and demand for housing credit and, indeed, personal credit generally is weak. Electricity prices are rising sharply. Almost on a daily basis there are reports of job losses in the non-resource side of the economy.

The sharemarket has been volatile and losing ground – about 11% over the past 12 months – and superannuation funds would be lucky to have posted positive returns last financial year. The latest Chant West analysis puts the median growth fund return at a meagre 1%.

And, of course, the carbon tax is now live, although its initial impacts will be more psychological than real.

Conventionally today’s TD-Securities-Melbourne Institute monthly inflation survey, which showed the annual inflation rate fell to 1.6% in the 12 months to June 2012, might be regarded as good news. It could, however, be regarded as the out-working of a weakening economy. The unexpectedly strong first-quarter GDP growth may have been an aberration.

All that would appear to provide a strong argument that the Reserve Bank should cut official interest rates, again, when its board meets tomorrow. It is most unlikely, however, that it will do so.

It was clear from the minutes of last month’s meeting that the decision to cut rates by 25 basis points was very finely balanced and ultimately motivated by concerns about the state of the eurozone rather than the domestic economy.

Given that fears about Europe have, momentarily at least, receded slightly and that the unexpectedly strong GDP numbers for the March quarter came out after that decision, there isn’t an obvious new argument for another rate reduction at this point, particularly as it may take some time for the most recent 75 basis point reductions in the cash rate to work their way through the economy.

For a beleaguered retail sector, while it might be positive news that their online competitors aren’t hoeing into their sales bases quite as aggressively as they were a few months ago, there’s nothing much that’s positive on the horizon to offer any prospect of relief from the current recession-like context in which they are operating.

This article first appeared on Business Spectator.