Australia | Jun 01 2009
By Chris Shaw
Australian retail sales data for April confirmed the Federal Government’s stimulus packages have worked in the sense they have provided a boost to sales figures as in annual terms sales rose 6.8% for the month. The April data are about 6.3% stronger than in September last year, which was before the first stimulus package came through.
This is despite the April number coming in slightly below expectations as the increase of 0.3% compared to market estimates of a 0.5% increase. The small increase for April followed the 2.2% increase recorded in March. According to Westpac, the sales result hints at some firming of cyclical demand as for example household goods sales rose in the period and spending here is usually deferred in an economic downturn.
As well, the bank’s senior economist John Peters notes all segments of retail sales were higher in April when compared to last September’s pre-stimulus levels. This adds weight to the argument the stimulus packages have been effective.
ANZ Economist Riki Polygenis takes the view today’s data show while the household sector is responding to the stimulus measures, the downturn is falling on the business sector, as evidenced by the 7% fall in company profits, also reported today.
Polygenis notes the company profits downturn highlights the current weakness in the manufacturing, property, business services and mining sectors, reflecting in part cuts in margins. This is the result of companies attempting to remove excess inventory in a desire to carry lower stock levels in what remains a tough operating environment.
Of note, Polygenis points out inventories fell at a slower pace than in the previous quarter and in both her view and that of Commonwealth Bank economist James McIntyre, the small fall in inventories means there is some upside risk to GDP forecasts for the March quarter. Having said that, both still see a negative number as likely with Polygenis forecasting a fall of 0.2% and McIntyre a 0.1% decline.
Today’s numbers shouldn’t see any changes in Reserve Bank of Australia policy with respect to interest rates in Polygenis’ view, meaning lower interest rates rates are still likely but not until later this year. The market tends to agree as the Australian dollar has done little on the back of today’s data releases.