Australia | Jan 09 2007
By Chris Shaw
Australian retail sales rose 0.2% in November, seasonally adjusted, Westpac Banking Corporation and Commonwealth Bank noting the result was a little below market expectations of a 0.3% increase. Westpac had forecast a 0.4% lift, Commonwealth an increase of 0.5%.
Despite this, ANZ Banking Group suggests there is unlikely to be any change to the current position of interest rate risk being tilted to further increases, as the result shows underlying economic conditions remain strong.
It takes the view the figure was not a surprise, as it comes on the heels of an adjusted 0.9% increase in October and would have been somewhat impacted by the decision of the Reserve Bank of Australia (RBA) to lift official rates in November.
The bank also suggests the outcome shows the November rate rise was not a step too far, as the impact of higher rates is being offset by a strong labour market and lower petrol prices, meaning households remain reasonably comfortable with rates at current levels.
Commonwealth Bank expects the retail market will enjoy solid conditions in coming months, as the continued lift in real incomes will underpin consumer purchasing power. It also suggests the RBA has finished hiking rates in this cycle, an outcome that supports its expectation of a 6-7% increase in retail spending in the first six months of 2007.
In ANZ’s view the upcoming CPI data will be the next potential driver of a further change in rates, Westpac agreeing there remains some chance of a further hike in February.
There has been little market reaction to today’s number, with Westpac noting both the currency and bond market were little changed in the early reaction to the figure.