Australia Retail Sales Unexpectedly Fall; Currency Declines

Australian retail sales unexpectedly declined for the first time in four months in November as consumers spent less on household goods and clothing in an economy with a weaker employment outlook.

Sales dropped 0.1 percent to A$21.5 billion ($22.6 billion) from a month earlier, when they were unchanged, the Bureau of Statistics said in Sydney today. The result compares with the median forecast for a 0.3 percent gain in a Bloomberg News survey of 15 economists, none of whom predicted a decline.

The local currency declined as the data validated Reserve Bank of Australia Governor Glenn Stevens’s decision to reduce the benchmark interest rate to 3 percent, matching a half-century low, in December. Policy makers are trying to stimulate industries outside of mining, where investment is expected to peak this year, to pick up some of the slack in the economy.

“This is a worry because it suggests that the Reserve Bank’s rate cuts aren’t yet getting traction with households,” said Joshua Williamson, Citigroup Inc.’s senior economist in Sydney. “The central bank has some further work to do despite the fact that the global backdrop has improved.”

The local dollar fell to $1.0497 at 12:33 p.m. in Sydney from $1.0517 before the release. The yield on 10-year Australian government debt slipped to 3.39 percent from 3.42 percent yesterday.

Food Unchanged

Spending on household goods fell 0.9 percent, and consumers spent 0.6 percent less on clothing and footwear, today’s report showed, while food retailing was unchanged. They spent 1 percent more at other retailing outlets, a category that includes news agents and florists, it showed.

Traders are pricing in a 38 percent chance of a reduction in the benchmark rate to 2.75 percent next month, swaps data compiled by Bloomberg show.

Paul Bloxham, chief economist for HSBC Holdings Plc in Sydney who previously worked at the RBA, said the retail data cover a period before an improvement in the U.S. fiscal position and a better commodity price outlook that is reflected in a surge in iron ore prices.

A separate government report today showed job vacancies in the three months to November declined 6.9 percent,the steepest fall since March 2001.

General Motors Co.’s Holden unit said in November it will cut about one in 13 jobs at its main plant in Adelaide, South Australia, as the strong local currency and increased car imports crimp sales.

Auto Cuts

Ford Motor Co. said in July that it would offer as many as 440 severance payouts at its Australian division, while Toyota Motor Corp. said in January 2012 it would cut 350 jobs, about 10 percent of the workforce at its main plant.

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

Consumer confidence slumped in December by the most in nine months, according to a Westpac Banking Corp. and Melbourne Institute survey released Dec. 12. The weakness in sentiment is weighing on the housing market, where prices across the nation’s eight state and territory capitals fell 0.4 percent in the 12 months to Dec. 31, according to the RP Data-Rismark home value index.

“Households are pessimistic about the prospects for the economy, jobs and house prices, which is prompting them to shut their wallets,” said Matthew Circosta, an economist at Moody’s Analytics in Sydney. “Lower interest rates have failed to boost consumer confidence.”

The central bank lowered borrowing costs by 50 basis points late in 2011 and a further 125 basis points in May, June, October and December to help stimulate the economy as a mining investment boom crests.

Resource investment to meet Chinese demand and foreign investment funds seeking a haven have spurred gains in the nation’s currency, which has stayed above parity with the U.S. currency for more than six months, its longest stretch above that threshold on record.

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