Holiday shoppers kept their credit cards in their wallets, waiting for post-Boxing Day discounts, as December retail sales fell an astonishing −0.7% from November’s levels, adjusted for seasonal variations.

Two days ago, the Reserve Bank of Australia kept interest rates on hold at 3.75%. However, in the final quarter of the year, the central bank raised rates three consecutive times, and the effects were felt by retailers large and small.

Sales in the entire fourth quarter of 2009 crept higher by 1.1% over the third quarter. But as the effects of the government’s economic stimulus programme wane, and rising borrowing costs put pressure on household budgets constrained by mortgages and credit card repayments, retailers had to cut their prices to get even that.

All in all, the holiday shopping season isn’t one merchants will want to remember.

“Christmas was not as strong as retailers hoped for and, apart from the burst of activity on Boxing Day, the post-Christmas sales were pretty patchy too,” said Margy Osmond, CEO of the Australian National Retailers Association. “There was unprecedented discounting both before and after Christmas, which has certainly put pressure on retailers’ margins.”

Sales fell most at department stores (−3.5%), along with personal accessories (−1.9%), food sales (−1.3%), and household goods (−0.3%). The only concession by shoppers to the holiday spirit were sales by cafes and restaurants, which rose 2.5%.

Source: http://www.theaustralian.com.au