Australia Retail Sales Rise as Consumers Weather Global Turmoil
Australian retail sales advanced in September for a third straight month, led by spending on household goods and at restaurants, as consumers withstood fallout in financial markets from Europe’s debt crisis.
Sales gained 0.4 percent from a month earlier, when they rose 0.6 percent, the Bureau of Statistics said in Sydney today. That matched the median forecast in a Bloomberg News survey of 23 economists.
Household spending may accelerate into the holiday season after Reserve Bank Governor Glenn Stevens this week lowered the nation’s benchmark interest rate for the first time in 31 months, emboldened by slower inflation. Australian consumers spent in September even as Europe’s fiscal woes intensified, sending the S&P/ASX 200 Index of stocks falling 6.7 percent that month and the Australian dollar down 9.8 percent.
“The consumer is certainly not pulling back,” said Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney. “The discretionary parts of retail were pretty solid -- things like household goods and cafes.”
Australia’s currency stayed lower and bond yields were little changed after the report.
The local dollar bought $1.0225 at 12:14 p.m. in Sydney from $1.0252 before the data and $1.0347 late yesterday in New York. The 10-year government bond yield was 4.21 percent, from 4.233 percent yesterday.
The report showed spending in all categories rose, led by a 1 percent gain in household goods, and outlays at cafes and restaurants that increased 0.9 percent. Purchases of clothing and footwear and at department stores were up the least, rising 0.1 percent, it showed.
Retail sales, adjusted to remove inflation, advanced 0.6 percent in the three months through Sept. 30 from the previous quarter, the biggest jump since the April-June period last year, the report showed. Economists forecast a 0.6 percent quarterly gain.
Wesfarmers Ltd., Australia’s second-largest retailer, said last month that first-quarter sales growth rose to 8 percent at its Coles supermarket unit as lower prices lured customers. Revenue at Coles climbed to A$8.1 billion ($8.3 billion) in the three months ended September from A$7.5 billion a year earlier, Perth-based Wesfarmers said in a filing Oct. 20. Lower prices for staples such as bread, milk and eggs have enabled Coles to win back customers and reverse market share losses to Woolworths Ltd. and smaller chains as Wesfarmers’s home-improvement chain Bunnings adds new stores.
In response, Woolworths announced this week that it plans to add 10,000 jobs in the current financial year as it opens 39 new supermarkets and expands its Masters home-improvement venture with Lowe’s Cos.
In contrast, Harvey Norman Holdings Ltd., Australia’s biggest electronics retailer, said this week that sales fell in the three months through Sept. 30. It cited the strength of the local currency and “intense competition” for the weakness.
The RBA’s Stevens lowered the overnight cash rate target to 4.5 percent from 4.75 percent on Nov. 1, the first reduction since April 2009. Interbank cash rate futures show a 100 percent chance he will reduce the overnight cash rate target at the December meeting.
“What the RBA said a couple of days ago is that they didn’t think it was right to have mildly restrictive policy so they’ve adjusted for that,” Walters said. “It wasn’t that they thought the economy was collapsing or that consumers were really retrenching.”
After reducing rates, Stevens noted stronger economic data in the U.S. and signs that Europe is getting its fiscal turmoil under control. “But it is likely to be some time yet before concerns about the European situation can definitively be laid to rest and the effects of the recent turmoil on confidence may result in a period of precautionary behavior by firms and households,” he said.
Australia’s unemployment rate declined in September for the first time in six months, a government report showed Oct. 13, as the number of people employed rose by 20,400. The jobless rate fell to 5.2 percent from 5.3 percent.
Driving the nation’s economy is demand from developing nations including China and India for iron ore, coal and natural gas. The central bank said in October the value of liquefied natural gas projects announced so far in 2011 is around A$70 billion.
Australia’s household savings rate held above 10 percent in the three months through June and RBA Assistant Governor Philip Lowe said in September that higher savings “are likely to be quite persistent.”
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