Spending disappoints after gloomy GDP

Weak consumer spending figures were hardly the antidote to soothe concerns about the state of the economy.

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The day after economic growth was reported slowing to its softest pace in two years, more up-to-date retail spending data recorded their first drop since May 2014.

Household spending was one of the few positives in Wednesday’s national accounts that showed the economy growing at just 0.2 per cent in the June quarter.

But July retail data on Thursday showed a 0.1 per cent drop when economists had been expecting further strength.

“It may suggest that weak household income growth and lacklustre consumer confidence is weighing even more on spending than we had previously thought,” ANZ economists said in a note to clients.

Despite the gloomy national accounts, government ministers continued to talk up the economic outlook.

However, Prime Minister Tony Abbott conceded the economy was not perfect.

Finance Minister Mathias Cormann blamed the largest fall in the nation’s terms of trade in 50 years for the meagre two per cent annual growth rate.

“We are very optimistic about the outlook moving forward,” he told ABC radio, saying the government’s plan for stronger growth and jobs was on track.

Shadow treasurer Chris Bowen scoffed at the statements, and said the government must be living in a parallel universe if it thought everything was OK with the figures.

“The treasurer’s actually got to have a dose of reality,” he told ABC radio, adding that jobs and growth could not be delivered by merely talking about them.

Asked whether he believed Australia was heading towards a recession, Opposition Leader Bill Shorten told reporters in Perth: “I sincerely hope not.

“I think the Australian people are resilient but the real challenge here, and we can’t deny it, is that our real growth and our nominal growth are too low.”

It wasn’t all doom and gloom, however. Other figures showed the monthly international trade deficit had improved and exports rose two per cent in July.

Exports had been the biggest detraction to growth in the June quarter.

The services sector in August also recorded its strongest expansion since March 2008.

Australian Industry Group boss Innes Willox said the figures suggested the economy was gradually finding sources of growth to balance the further fall in mining-related investment.