Favorable Consumption Trend – But Sluggish Retail Sales Extending Into Pre-Christmas Shopping

In the first six months of 1995, Austrian consumers spent Sch 622 billion, 4.7 percent (+2.4 percent in volume) more than a year earlier. This marked increase implied a fall in the private household saving ratio by about ½ percentage point, since gains in disposable income were damped by measures of fiscal retrenchment. Spending on domestic goods and services increased below the average. A jump in expenditure by Austrians abroad was caused not only by stronger demand for foreign travel, but also to a large extent by higher "direct" imports of consumer goods. These constitute welfare gains for the consumer – provided that they actually offer a price advantage – while causing public revenue losses and stronger competition in the retail trade sector. Sluggish growth of domestic spending (by Austrians and foreign tourists) and the higher import propensity both constrain the expansion of retail sales in Austria. The latter were barely higher (+0.2 percent) in the first half of 1995 than a year ago. Wholesale trade, being cyclically more volatile, increased by 1.6 percent in volume. Retail sales prices rose only modestly in the first semester (+0.6 percent year-on-year), due also to the effects of EU accession. The drive for rationalization gave a boost to productivity and led (together with the failure of the "Konsum" cooperative) to a fall in employment by 0.4 percent. Christmas shopping in 1995 is likely to be influenced by the first-time opening of stores on December 8th, a public holiday in Austria. As nationwide empirical evidence is lacking, econometric models may yield only a rough order of magnitude for the (additional) sales potential. Thus, December sales may be boosted by between Sch 100 million and Sch 1.5 billion (net of VAT). A reference value for the effect of December 8th shop opening is provided by the 1991 experience when this date fell on a Sunday and therefore no shopping day was lost. Based on this experience, model calculations for December 1995 sales show a net gain of nearly Sch 1 billion ±0.5 billion. This estimate does not mean that on December 8th itself sales will be in that range; rather, they will be higher and relatively lower on the surrounding days. Christmas sales may be expected to slightly exceed last year's level (by about ½ percent) only if consumers make full use of the greater shopping opportunities.