Australian retail sales unexpectedly declined in July by the most in almost two years and company profits dropped for a third straight quarter, sending the local currency to a five-week low.
Sales dropped 0.8 percent to A$21.4 billion ($22 billion) from June, when they rose a revised 1.2 percent, the Bureau of Statistics said in Sydney today. That was the first fall this year and steepest since October 2010. Gross operating profit declined 0.7 percent last quarter from the January-March period, when they slid a revised 3.7 percent, another report showed.
The retail figures reflect the worst month for department-store sales in seven years and increasing concern about job security as Europe darkens the global outlook. Reserve Bank of Australia Governor Glenn Stevens, who economists predict will keep the nation’s benchmark interest rate unchanged tomorrow after cutting by 1.25 percentage points from November to June, has said the economy is growing near its average pace.
“Sentiment is pretty fragile given everything that’s going on in the euro area,” said James McIntyre, a senior economist in Sydney at Commonwealth Bank of Australia. (CBA) “If this weak retail outcome is something that consumers latch onto, then that could be something that starts to swing broader sentiment in favor of another rate cut, despite what the RBA has been saying over the last few months.”
Today’s decline in retail sales was greater than any of the 22 economists surveyed by Bloomberg News predicted. The median forecast had been for a 0.2 percent gain.
Spending at department stores plunged 10.2 percent, the biggest drop since April 2005, and consumers spent 2.8 percent less on other retailing, a category that includes pharmacies, newspaper shops and book stores, today’s report showed. They spent 2.4 percent more on household goods retailing, it showed.
The local dollar, which has risen 5.5 percent since the start of June, has helped contain import prices and costs for consumers. It traded at $1.0266 at 4:38 p.m. in Sydney, after touching $1.0240, the lowest level since July 25.
Woolworths Ltd., Australia’s largest retailer, last month posted its first annual profit drop in 13 years after taking a A$420 million charge for the Dick Smith electronics chain it’s put up for sale.
Australia’s largest supermarket operator is closing Dick Smith outlets since announcing plans to sell the business in January to focus on groceries, where it’s engaged in a price war with Wesfarmers Ltd. (WES)’s second-ranked Coles chain.
Billabong (BBG) International Ltd., the surfwear maker facing a takeover approach by TPG International LLC, last month posted its first loss since its initial public offering after taking writedowns amid falling sales and store closings.
Today’s profits data showed a 6.5 percent decline in the second quarter from a year earlier.
Earnings at mining companies fell 1 percent in the second quarter from the prior three months, utilities slumped 10 percent, manufacturers dropped 8 percent and retail declined 3.8 percent, according to today’s report. Profits at construction companies rose 6.6 percent, the report showed.
Australian help-wanted notices dropped for a fifth straight month in August as slumping business confidence delays hiring plans in mining states, a private report showed.
Jobs advertised in newspapers and on the Internet declined 2.3 percent last month after a 0.8 percent fall in July, according to an Australia & New Zealand Banking Group Ltd. (ANZ) report released today. National vacancies advertised in newspapers slumped 6.1 percent last month, and Internet notices were down 2.1 percent, the report showed.
The central bank today released its commodity price index for August showing the lowest reading since April 2010.
Commodity prices declined 4.3 percent on the month and 18.5 percent from a year earlier in Australian dollar terms, the RBA said in a statement on its website. The biggest contributors to the fall were lower prices for iron ore and coking coal, it said.
Australia’s unemployment rate probably rose to 5.3 percent in August, from 5.2 percent, economists said in a separate Bloomberg News survey before a Sept. 6 government report.
The central bank lowered borrowing costs by a total of 50 basis points late last year and a further 75 basis points in May and June to help shield the economy from Europe’s debt crisis and slower growth in China. It held the key rate at 3.5 percent, the highest among major developed economies, at the past two meetings.
Traders are pricing in an 81 percent chance that the RBA will lower borrowing costs by another 50 basis points by year end to 3 percent, matching the 50-year low the benchmark reached at the height of the global financial crisis that started in 2008.
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