Jobs not housing key to retail growth

Higher housing prices are having a direct impact on retail sales, according to the latest retail forecast report from Access Economics.

The research firm said retail sales growth of just 0.3% over the nine months toMarch 2010 contrasted to an “astonishing” 20% growth in housing prices. 

“This strong house price growth and the associated increase in rents has been an important component in sustaining inflation. As such, strength in house prices have been a key reason for the rapidity of recent interest rate rises. The result is that mortgage interest costs have been rising rapidly as a share of income, leaving less room for retail spending,” Access Economics director David Rumbens said.

“It also adds to the longer term trend where housing costs have been eking out a higher share of the consumer budget (both in terms of principal and repayment costs),” he said.

“Fortunately for retailers, the cavalry is on its way,” Rumbens added. “Nominal retail sales growth in the month of April was a more respectable 0.6%.”

Access Economics said the backbone for retail spending growth - labour income growth - continues toimpress with very strong jobs growth recently.

More than 250,000 new jobs have been created between August 2009 and April 2010 – an annualised rate of jobs growth of 3.5%. Over 70% of these jobs have been full-time positions.