Australia Retail Sales Rise in January, Spurred by Rate Cuts
Australian retail sales advanced faster than economists forecast in January, led by gains in household goods as interest-rate reductions encouraged spending.
Sales climbed 0.9 percent to A$21.6 billion ($22.1 billion) from a month earlier, when they fell a revised 0.4 percent, the Bureau of Statistics said in Sydney today. The result -- the strongest rise since June -- compares with the median forecast in a Bloomberg News survey of 23 economists for a 0.4 percent gain.
The data validate Reserve Bank of Australia Governor Glenn Stevens’s decision to hold rates last month after six reductions totaling 1.75 percentage points from November 2011 to December 2012 to help buttress the economy. Policy makers are trying to stimulate industries outside mining, where investment is expected to plateau this year, and most economists predict the RBA will leave borrowing costs unchanged again today.
“There’s been a lot of anecdotal evidence that sales have improved,” said Tom Kennedy, an economist in Sydney at JPMorgan Chase & Co., which was at the top end of analysts’ estimates with a forecast of a 0.7 percent increase. “If you were to see consecutive months of data like this, I don’t think the RBA would hike rates in a hurry, but they would back away from their negative bias.”
Spending on other retailing, a category that includes books and sporting goods, rose 2.6 percent, and consumers spent 1.3 percent more on household goods, today’s report showed. They spent 0.6 percent less at department stores, it showed.
The local dollar traded at $1.0216 at 12:12 p.m. in Sydney from $1.0199 before the release.
Resource investment to meet Chinese demand and foreign investment funds seeking a haven have spurred the nation’s currency, which has stayed above parity with the U.S. currency for eight months, its longest stretch above that threshold since it was freely floated in 1983.
A separate report today showed Australia’s current-account deficit unexpectedly narrowed in the three months through December. The shortfall on goods, services and investment was A$14.68 billion from a revised A$15.05 billion in the third quarter; the median estimate in a Bloomberg News survey of 21 economists was for a A$15.3 billion gap.
Net exports added 0.6 percentage point to gross domestic product growth in the fourth quarter, the bureau said today. Economists forecast a 0.5 point addition.
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. The central bank has said there’s evidence its rate reductions are beginning to take effect.
“There is a good deal of interest rate stimulus in the pipeline,” Stevens said Feb. 22 in semiannual testimony to a parliamentary panel in Canberra. “It is having an effect.”
Woolworths Ltd. (WOW), Australia’s largest retailer, said last week first-half earnings rose 19 percent as cheaper imports and cost-cutting helped wring more profit from sales.
Australian consumer confidence surged last month by the most since September 2011 as rate cuts gained traction with households, a private report showed Feb. 13.
“We are optimistic that improved consumer confidence will translate to a sustained improvement in retail spending in coming months,” said Katrina Ell, an economist at Moody’s Analytics in Sydney. “This is a solid result after months of disappointment.”
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