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Retail weak but Australians still spend

Reported by AAP
Tuesday, April 3, 2012
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Australians are spending their hard earned cash on eating out and holidays as the nation's retail sector continues to struggle.

Official data from the Australian Bureau of Statistics (ABS) show that Australian retail spending rose just 0.2 per cent in February, in line with market expectations.

Retail trade rose in the month to a seasonally adjusted $20.988 billion, compared to a downwardly revised $20.954 billion in January, the ABS said on Tuesday.

CMC chief market strategist Michael McCarthy said the result was unsurprising, given the sluggish performances seen amongst big retailers recently.

"Given the more than 50 per cent falls we've seen in the last six months in these headline retailers, it's probably not going to have a massive impact on the share market," he said.

However, consumer confidence was not as weak as suggested by the data, Mr McCarthy said.

"We are still seeing strong activity in other areas of the economy, notably overseas travel and restaurants and cafes," he said.

"I would suggest this weakness is specific to some of the structural shifts that are going on in retail, rather than the broader economic activity of consumers."

Mr McCarthy said the Reserve Bank of Australia would not be unduly concerned with this data, and was not likely to cut rates at its meeting on Tuesday afternoon.

"It's becoming increasingly clear that the Reserve Bank is looking across the economy as a whole, and is unlikely to move its monetary policy on the basis of the concerns of a single sector," he said.

Macquarie senior economist Brian Redican said retail sales were strong where the mining boom was strong, but not elsewhere.

Retail sales fell 0.6 per cent in NSW and 0.4 per cent in Victoria. They rose 1.5 per cent in Queensland and 1.0 per cent in Western Australia.

"What is interesting is the regional composition there, where it does look like you're getting exacerbating weakness in NSW and Victoria, while Queensland and Western Australia seem to be holding up pretty well," Mr Redican said.

Mr Redican said there might be a rebound in retail sales in the middle of 2012.

"There is that window around the middle of the year when households get their carbon tax compensation payments.

"Households could be getting around $300 to $600 around the middle of the year and there will be a strong temptation to spend it."

National Australia Bank's Spiros Papadopoulos said the data showed the retail sector remained soft, despite two official interest rate cuts late last year.

"It highlights that growth in the retail sector remains quite soft," he said.

"And, it shows that the interest rate cuts from late last year have not provided much support for the sector."

The RBA cut the cash rate by 25 basis points in November and, by the same amount, in December bringing it to its current level of 4.25 per cent.

29/11/2014 02:39Sydney, Australia. 29 November,2014
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