Beer consumption has hit a 65-year low. The apparent consumption of alcohol consumed as beer fell from 4.45 litres to 4.23 litres per person, in 2010/11- the lowest result since 1945/46.
- Total apparent consumption of alcohol fell for the fourth straight year, down from 10.27 litres of pure alcohol per person to a 9-year low of 9.99 litres per person. The equivalent of 2.2 standard drinks per day per person aged 15 years and over.
- Services sector slumps: The Performance of Services index slumped by 7.4 points to 39.6 in April – a 3-year low. A reading below 50 suggests contracting activity.
- All the key components of the index fell in April. Of note, the new orders sub-index and sale both fell to 3-year lows while the employment sub-index contracted at a faster pace.
What does it all mean?
- Australia used to be a beer drinking nation. Well that has changed, just like a whole host of other things. Wine and beer consumption were neck and neck at the end of June last year and it could very well be the case that today more Australians are consuming alcohol in the form of wine, not beer.
- Interestingly Aussies aren’t just cutting back on beer, alcohol consumption as a whole fell for the fourth straight year and is now down at 9-year lows. Perhaps it’s all about quality not quantity or perhaps Aussies are taking health matters seriously. Not only are we cutting back on alcohol, spending on cigarettes and take-away food is falling. Australia is making a serious attempt at climbing the ranks of world healthiest nations.
- Aussies aren’t cutting back on the drink completely as consumption of spirits has lifted. Perhaps in the current climate, more people are looking for a good, stiff drink!
- The latest figures on the services sector were clearly disappointing. However the result does further validate the recent super-sized rate cut by the Reserve Bank. The services sector has contracted for nine months out of the past year. And the latest result suggests that that there is no real catalyst for a turnaround. In fact in April the pace of contraction was the fastest in three years.
- Businesses are under substantial pressure at present with costs edging higher and consumers driving hard bargains. Business margins are constrained, thus depressing profitability. In addition the forward looking index of new orders and sales are also holding at the weakest levels in three years.
- The main factors driving the weakness in the services sector include high interest rates, a stronger currency and the conservative buying behaviour of consumers and businesses Clearly the latest rate cut could not have come at a better time and will help to alleviate some of these detrimental factors in coming months. However it is unlikely that the service sector will see a full-blown turnaround anytime soon – rather it is likely to be a slow grinding recovery
What do the figures show?
Alcohol consumption
- The apparent consumption of alcohol consumed in the form of beer fell from 4.45 litres of pure alcohol per person (aged 15 years or more) to 4.23 litres in 2010/11. It was the lowest result in 65 years. Consumption of full-strength beer fell from 3.67 litres to 3.49 litres; mid strength fell from 0.57 litres to 0.56 litres; and low strength fell from 0.22 litres to 0.18 litres.
- The consumption of alcohol in the form of wine fell from a record high of 3.82 litres to 3.74 litres in 2009/10 with declines in white, red and other wines. But consumption of alcohol in the form of spirits rose from 2.00 litres to 2.03 litres with spirits up from 1.28 litres to a record high of 1.32 litres while “ready to drink” eased from 0.71 litres to a record low of 0.70 litres.
- Total apparent consumption of alcohol fell for the fourth straight year, down from 10.27 litres of pure alcohol per person to a 9-year low of 9.99 litres per person. As a standard drink consists of 12.5 mls of pure alcohol, this is equivalent to an average of 2.2 standard drinks per day per person aged 15 years and over.
Services sector gauge
- The Australian Industry Group/Commonwealth Bank Australian Performance of Services index fell by 7.4 points to 39.6 in April – marking the sharpest contraction in three years.
- All the key components of the index fell in April. Of note, the new orders sub-index slumped from 47.7 to a 3-year low of 35.8; the employment sub-index fell from 48.9 to 46.6; and sales fell from 44.6 to 33.8 – another 3-year low.
- According to the survey: “ Respondents across all sub-sectors continued to note that economic uncertainty, low levels of activity in large parts of the manufacturing and construction sectors, and the high level of the currency is weighing on activity.” “While the activity indices for each sub-sector are seasonally adjusted, the timing of Easter this year suggests that the Easter holiday period may have had a larger impact on the results of the April survey than in other years.”
What is the importance of the economic data?
- The Australian Bureau of Statistics releases alcohol consumption data each year. The data is important for the hospitality sector.
The Performance of Services index is released by Australian Industry Group and the Commonwealth Bank each month. The PSI is designed to provide a guide to conditions in retail, financial and other service sectors.
What are the implications for interest rates and investors?
- To some degree the service data is now backward looking highlighting the dearth in activity across the economy. Looking forward the recent rate cut is likely to provide a modest degree of stimulus and more importantly a boost to confidence. The Reserve Bank is likely to assess the impact over the next few months before deciding if further rate cuts are necessary.
- A more multicultural Australia and higher income and wealth levels goes a long way to explaining increased wine consumption since the 1970s as well as perceived health benefits in recent years.