Australian Retail Sales Fall in Longest Decline for 13 Years

Australian retail sales unexpectedly fell for a third month in December, the longest stretch of declines in 13 years, as consumers spent less dining out amid a deteriorating employment outlook. The local currency dropped.

Sales slipped 0.2 percent to A$21.4 billion ($22.2 billion) from a month earlier, when they declined a revised 0.2 percent, the Bureau of Statistics said in Sydney today. The result compares with the median forecast in a Bloomberg News survey of 24 economists for a 0.3 percent gain. Only one economist forecast a decline.

The weak holiday shopping result underscores Reserve Bank of Australia Governor Glenn Stevens’s decision to make six interest-rate reductions -- totaling 1.75 percentage points -- from November 2011 to December last year to buttress a slowing economy. The benchmark rate is at 3 percent, matching a half-century low, as policy makers aim to stimulate industries outside of mining and encourage hiring.

Weakness “is fairly broad-based,” said David de Garis, a senior economist at National Australia Bank Ltd. in Melbourne, which predicted the result and expects the RBA to cut the cash rate to a record 2.25 percent in the third quarter. “For the time being, retail is making no contribution to growth in the economy.”

Photographer: Ian Waldie/Bloomberg

A woman buys jewelry at a market stall at Bondi Beach in Sydney. Close

A woman buys jewelry at a market stall at Bondi Beach in Sydney.

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Photographer: Ian Waldie/Bloomberg

A woman buys jewelry at a market stall at Bondi Beach in Sydney.

Currency Drops

The yield on three-year Australian notes was 2.86 percent as of 12:55 p.m. in Sydney compared with 2.91 percent before the data were released. The so-called Aussie fell to $1.0355, the weakest level since Dec. 27.

Spending on other retailing, a category that includes pharmaceutical goods and book retailing, dropped 2.8 percent, and consumers spent 1.1 percent less at cafes and restaurants, today’s report showed. They spent 2.1 percent more on clothing and footwear, and 0.8 percent more at department stores, it showed.

Retail sales, adjusted to remove inflation, rose 0.1 percent in the three months through December from the previous quarter. Economists had forecast a 0.3 percent increase.

Australia’s jobless rate probably rose to 5.5 percent in January, matching the highest since April 2010, according to the median estimate in a Bloomberg News survey ahead of the government’s monthly employment report tomorrow.

Consumers Unpersuaded

Australian consumer confidence was little changed last month as households concerned about their finances shrugged off rate reductions, a private report showed Jan. 16.

Woolworths (WOW) Ltd. Chief Executive Officer Grant O’Brien said last week that cost of living pressures are “top of mind” for consumers, who remain cautious.

Photographer: Ian Waldie/Bloomberg

A woman looks at shoes displayed outside a store at Bondi Beach in Sydney. Australians spent 2.1 percent more on clothing and footwear, and 0.8 percent more at department stores. Close

A woman looks at shoes displayed outside a store at Bondi Beach in Sydney. Australians... Read More

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Photographer: Ian Waldie/Bloomberg

A woman looks at shoes displayed outside a store at Bondi Beach in Sydney. Australians spent 2.1 percent more on clothing and footwear, and 0.8 percent more at department stores.

“I don’t think that consumers have suddenly woken up in December and suddenly felt completely confident again,” he said in a media call Jan. 30. “There still is a lack of confidence in consumers and I think that will continue to be the case for some time.”

The central bank lowered borrowing costs by a total of 50 basis points late in 2011 and a further 125 basis points in May, June, October and December to help stimulate the economy. Stevens said yesterday after leaving the benchmark unchanged that there is room to cut further as a weaker labor market contains inflation.

Rate Bets

Traders are pricing in a 54 percent chance of a quarter percentage point rate cut next month that would take the benchmark borrowing costs to a record-low 2.75 percent, swaps data compiled by Bloomberg show.

“During 2012, there was a significant easing in monetary policy,” Stevens said in a statement yesterday. “Though the full impact of this will still take further time to become apparent, there are signs that the easier conditions are having some of the expected effects: the demand for some categories of consumer durables has picked up.”

Metcash Ltd. (MTS), Australia’s largest grocery wholesaler, in November cut its full-year earnings forecast amid a price war with larger supermarket chains.

Metcash has been squeezed as competition between Australia’s two largest supermarket chains, Woolworths and Wesfarmers Ltd (WES).-owned Coles, has driven grocery discounts. A push to sell milk at A$1 a liter contributed to a 27 percent profit fall at the dairy and drinks division of Kirin Holdings Co.’s Lion unit, the company said in August.

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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