TRADING INSIDER: Here's Where To Find Out How Australians Are Spending Money, And Why It Can Help Your Investment Decisions

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In earlier Trading Insider posts, we looked at everyday decisions affecting the stock market, how consumer sentiment affects domestic growth in Australia, and where you can look to see the lead indicators of where these inputs might take the economy.

But while interest rate, bond, forex and commodity investors might be satisfied with the helicopter view of the economy which the macro data provides, market traders and investors are often looking for something more specific and concrete about various sectors.

Here are our favourite places to stay abreast of the key numbers showing where consumers are spending their money and what it might mean for stocks, the stock market and the economy.

Retail Sales And Sector Breakdowns

The Australian Bureau of statistics releases a monthly detailed study of retail sales in Australia about 4-5 weeks after the end of the month.

While most news stories might focus on the headline number such as the 0.2% rise in May retail sales, the breakup of pluses and minuses of the various sectors – the bit of the data that really unlocks the secrets of consumer spending – is where the action is.

Food is the big-ticket item, accounting for 41% of all “bricks and mortar” retail with household goods coming in a distant second with 17% with cafes and restaurants making up 14%. The “other retail category comes in with a 14% share.

The key for investors following stocks and looking for signs of which sectors might be improving – or not as may also be the case – is to look at the change each month in the individual subcomponents of retail. So look at changes in department stores and the implications in trends for David Jones and Myer. Look to changes in food if you’re interested in Wesfarmers and Woolies, and especially the change in what we might call discretionary retail like cafes, restaurants and takeaway which is the “want”, not “need” section of retail sales.

It’s not the whole picture, no one statistic ever is, but it is a big part of the picture.

Company Announcements and Reporting

Australian companies don’t report as often as the quarterly reports we see from US corporations but the half yearly updates are an important indicator both to what is going on in the economy as a whole and how those trends might be affecting individual companies.

Importantly Australian companies also discuss their outlooks at various investment conferences and ASIC rules around continuous disclosure mean these presentations need to be made available on the ASX website.

For example this slide from a JB Hi-FI presentation made in May 2014 is exactly the sort of update that an investor should know about. It contains not only important company-specific information but also details that can be useful for sector analysis as well.

JB Hi-Fi, Woolworths, Wesfarmers (Coles, Bunnings, OfficeWorks, Dan Murphy’s), David Jones, Myer – the list is extensive – these are the companies where you can find great information about the Australian economy and maybe some leads into stocks that appeal to you.

I’m a macro trader and economist so I’m looking at all of this data to help figure out where the Aussie dollar is going, where RBA interest rates are headed and whether it’s still time to own bank stocks or not.

RBA Credit Aggregates

It is a truism of the modern economy that a lot of activity is driven by debt – what the Reserve Bank calls its financial aggregates.

By watching the movements in this debt, traders and investors can get a sense of what is going on in the economy. What is apparent in these financial aggregates also is that recently Australians have been more circumspect than they were before the GFC.

Australian demand for debt has had a material decline since the GFC. Indeed the demand for housing finance slipped to an all-time low after the GFC, though it has now recovered.

That is important information because it tells you Australians have been borrowing less and saving more since the GFC hit.

It also tells you that, with less borrowing and more savings, the velocity of money through the economy has slowed.

But the observant and vigilant can watch for a tune in retail sales and in borrowing and use this as an input into their investment strategy.

For example if, after plateauing for a number of months when retail sales started to lift in the middle of June last year, an investor had noticed and entered the market into a retail stock like Woolworths the return to June 2014 would have been more than 14% plus dividends.

The reverse is also true, of course: the investor who correctly detects a “top” in a particular sector can make a timely exit and put the money elsewhere.

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