Australia | Nov 04 2009
By Chris Shaw
In a surprise, given most Australian economic data has been better than expected of late, retail sales for September disappointed in falling 0.2% against market expectations of an increase of around 0.5%. The number means annual growth in retail sales now sits at 6.0%.
ANZ Banking Group economist Dr Alex Joiner notes the weakness was widespread, with all categories other than retailing falling, the largest declines coming in department stores, clothing and soft goods. Falls were also broad based across the states, with only Victoria posting a gain for the month.
According to Westpac, real retail sales were broadly as expected in falling 0.4%, the bank estimating today’s data is likely to cut about 0.1% from September quarter GDP. Commonwealth Bank senior economist Michael Workman suggests retail data in coming months are likely to remain choppy, with consumers expected to stay on the sidelines at least through the first half of 2010 as job market news improves. Joiner agrees, seeing little scope for retail sales growth to improve by much over the next three to six months.
In Joiner’s view, today’s data is likely to make the Reserve Bank of Australia think seriously about pausing on rate hikes at the December meeting as the combination of weak retail sales and strong consumer confidence would raise concerns as to how susceptible household finances are to tighter monetary policy, especially given the lack of any further handouts and ongoing weakness in the labour market.
Better results were seen in building approval numbers, which rose 2.7% for September and are now 11.7% higher for the year, numbers Joiner sees as confirming the trend upswing in new dwelling construction though not strong enough to alleviate concerns over Australia’s shortage of housing supply.
While the number was better than market expectations of a 2.3% increase, Westpac points out the details were disappointing as private sector house approvals rose just 0.3% despite strong gains in owner-occcupier finance approvals. As well, most of the gain in the month was from the more volatile units sector, while housing approvals have actually slowed since April from 4.1% to 1.7%.
CBA’s Workman notes low intrest rates and what was a looming deadline for the full first home buyers grant wold have provided support to the September numbers, but even allowing for rate increases and the reduction in the first home buyers grant he sees the environment for residential construction as remaining encouraging in coming months.
Joiner expects a further dramatic tightening of the supply/demand balance thanks to ongoing population growth, a trend he sees as causing a further deterioration in housing affordability beyond levels previously experienced.
Today’s data caused the Australian dollar to weaken, though Wetpac notes there remains support for the currency on any dips. The bank continues to suggest buying on the dips, with good support seen ahead of the low US89c region.