Australia | Sep 09 2008
The Australian economy continues to make life difficult for economist forecasts, as data is coming in either above or below market expectations in what remains a two-speed environment at present. The latest example is retail sales data for July, which in seasonally adjusted terms rose 1.4% for the month against a consensus forecast of
an increase of 0.5%.
According to ANZ Banking Group economist Katie Dean the better than expected figure was helped by the tax cuts that came into effect in the new financial year and slightly colder weather, which encouraged more people to go to shopping centres.
Commonwealth Bank economist James McIntyre agrees, while pointing out lower petrol prices would also have offered something of a boost. But Westpac cautions against reading too much into the numbers, pointing out changes to their composition mean the data may be somewhat
misleading.
In its view consumers are likely to remain under pressure for several months, so the bank sees a contracted period of relatively weak retail
sales numbers going forward. McIntyre tends to agree, noting retailer anecdotes are indicating August figures may show conditions remain
tough.
In contrast ANZ’s Dean sees the numbers as suggesting retail sales actually bottomed early in the year and are now improving slowly, which is indicative of an economy running at below trend growth levels but not towards a recession.
In terms of a market reaction Westpac notes post the release of the figures the yield curve has flattened a little as the market now sees less chance of an extended easing cycle with respect to monetary
policy. But Dean doesn’t see anything in the numbers to change her view the Reserve Bank of Australia will cut rates once more before the end of the year and then hold rates steady until well into 2009.