Retail sales forecast 1995

The Reserve Bank of Australia had lifted the cash rate by 2.75% between July and December 1994.  Charlie predicted that the retail sales growth rate would accelerate to mid-1995 before slumping.

The rate of growth did accelerate and peak in mid-1995 before slumping from 10% to 3% in late 1996.

This was documented in the Australian Financial Review, 24 January 1995 (Charlie was at that time employed by Marketing Insights).

Charlie’s insight was that some consumers prefer higher interest rates and react quickly by spending more.  Others prefer lower rates but cut spending in response to higher rates with a long lag. He developed a forecasting model which explicitly captured the different responses of these segments.

Unaware retailers may have had too little stock in the short-term and too much stock in the longer-term. 

The existence of these segments presents retailers with an opportunity for dynamically adjusting target marketing towards the beneficiaries of interest rate changes.