Australian June Retail Sales Unexpectedly Fall 1.4%
Australian retail sales unexpectedly fell in June for the first time in four months as households spent less on clothing and at department stores.
Sales dropped 1.4 percent from May, when they increased 1 percent, the Bureau of Statistics said in Sydney today. The median forecast of 19 economists surveyed by Bloomberg was for a 0.5 percent gain.
Today’s report suggests the impact from A$12 billion ($10 billion) in government cash handouts to households is waning after consumer spending helped Australia avoid a recession in the first quarter. Still, the economy may expand in the second quarter after retail sales rose 2 percent in the three months through June. Economists forecast a 1.3 percent gain.
“We still have retail sales at a very strong levels,” said Ben Dinte, an economist at Macquarie Group Ltd. in Sydney. “With the strengthening consumer sentiment, we should see retail sales hold up.”
The quarterly retail sales figure accounts for as much as 25 percent of Australia’s gross domestic product, Dinte added.
Household spending helped Australia’s economy avoid a recession after GDP rose 0.4 percent in the first quarter from the previous three months, when it shrank 0.6 percent. Second- quarter growth figures will be released on Sept. 2.
A separate report today showed house prices jumped 4.2 percent in the three months through June, the first gain in five quarters, as the lowest borrowing costs in half a century and government grants spurred demand among first-time buyers.
Currency Rises
The Australian dollar jumped to a 10-month high after today’s reports, reaching 84.71 U.S. cents, and trading at 84.51 as of 12:08 p.m. in Sydney. The two-year government bond yield rose 3 basis points to 4.43 percent. A basis point is 0.01 percentage point.
Spending at department stores fell 8 business cards online.8 percent and clothing sales declined 7.4 percent in June, today’s report showed. Consumers spent 2.9 percent more on household goods.
Central bank Governor Glenn Stevens will probably leave the benchmark interest rate unchanged at 3 percent today for a fourth month to spur domestic demand, according to all 19 economists surveyed by Bloomberg. The decision will be announced at 2:30 p.m. in Sydney.
While sales fell in June, some retailers are reporting growth in earnings. Gerry Harvey, chairman of Australia’s biggest electronics seller, Harvey Norman Holdings Ltd., said last month the worst of the economic slump in Australia had passed as consumer confidence returned amid government stimulus.
Consumer Confidence
“Six or nine months ago it was like Armageddon,” Harvey said in an interview on ABC’s Inside Business program on July 26. “Now, consumers are just more positive.”
Consumer confidence jumped in July to the highest level in 19 months, according to a Westpac Banking Corp. survey.
“It’s becoming more common for Australians to see the glass as half full than as half empty,” Governor Stevens said on July 28.
Signs of a rebound in Australia’s economy may prompt the central bank to revise its forecast for gross domestic product on Aug. 7.
In May, the bank predicted GDP would contract 1 percent this year before expanding 2 percent in 2010.
The central bank cut its benchmark interest rate by a record 4.25 percentage points between September and April.
Investors predict the rate will be 154 basis points higher in a year, a Credit Suisse Group AG index based on swaps trading showed at 12:10 p.m. in Sydney.