Australia | Nov 02 2006
By Greg Peel
Department stores continue to feel the brunt of Australia’s growing reluctance to shop till it drops, as was the case earlier in the year. A 4.0% fall in September department store retailing came hard on the heels of an 8.1% drop in August, contributing to the September overall retail sales figure which, according to the latest survey released by the Australian Bureau of Statistics, grew by a mere 0.1%.
This figure was less than even the economists were expecting, and follows an August figure that has now been revised down to a not much more inspiring 0.2%.
Adding to the slowing in retail were recreational goods retailing at minus 1.4% and the motley retail collection of “other”, at minus 1.1%. The September quarter retail growth figure settled at 0.4%, and the year-to-date 3.3%, but both figures were still below economists’ forecasts.
What this means, according to economists at ANZ Bank, is that the Australian consumer is unlikely to provide much support to a 2007 economy that will be suffering from a fall-off in the business investment boom. Says ANZ’s Mark (Senor) Rodrigues:
“These factors suggest we are likely to see economic growth rates with a ‘2’ in front of it for much of the next year, well below the average rate of 3.5-3.75% for the current expansion.”
Westpac economists are not so dour, however, suggesting consumers remain on the comeback trail from a flat 2005. Housing equity withdrawals continue, and the “resource states” are still humming along. The August rate increase will provide a dampener, but Westpac notes “offsets are the consumption-positive fiscal stance, the strength of the labour market, lower petrol prices and the currently non-restrictive credit environment.”
The two banks also faced off over the latest trade deficit result, which at $646m was much higher than expected. The trend is still improving, but ANZ sees the drought weighing on hopes of a move into trade surplus soon, while Westpac points to growing resource sector capacity (ie higher volume opportunities) and trading partner growth (eg China) as a reason not to be overly concerned.
The $64 question is thus: how does this affect the RBA’s monetary policy stance?
No change at this point is the answer. Expect a rate hike in November. However, the chance of further hikes into 2007 may now be diminishing slightly.