Australian Retail Sales Growth Stalls, Fueling Rate Cut Expectations
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Australian retail sales growth slowed in November, increasing by less than expected despite pre-Christmas and Black Friday discounts, Bloomberg reports. This underscores the cautious consumer sentiment and strengthens the case for an interest rate cut in the near future.
Retail sales rose 0.8% month-over-month, falling short of the projected 1% increase, according to figures released Thursday by the Australian Bureau of Statistics. This follows a downwardly revised 0.5% increase in October.
The weaker-than-expected data led to a brief depreciation of the Australian dollar and a reduction in bond yield declines. Money market pricing now indicates a greater than 70% probability of the Reserve Bank of Australia (RBA) easing monetary policy at its first meeting of the year in February.
"The weaker-than-expected retail trade figure, combined with yesterday’s soft underlying inflation, reinforces our view for a February RBA rate cut," said Carol Kong, an economist and currency strategist at Commonwealth Bank of Australia, to Bloomberg.
Despite the recent uptick in retail sales, economists caution that the improvement comes from a low base. "The retail outlook is not completely out of the woods yet," said My Bui, economist at AMP Ltd., to Bloomberg. "Overall, we take today’s data as relatively neutral in terms of implications for the RBA."
The RBA has identified the outlook for household spending as a key source of uncertainty, holding the cash rate at a more than decade-high of 4.35% last year while neighboring countries like New Zealand began easing. Minutes from the December meeting reveal that policymakers are more confident about inflation moving sustainably towards their target, but acknowledge that the battle is not yet won.
The underwhelming retail data adds to the economic challenges facing Prime Minister Anthony Albanese ahead of an election due by May 17. Albanese's center-left Labor government is trailing in polls amid public frustration over cost of living pressures and high borrowing costs.
The Australian Bureau of Statistics (ABS) intends to discontinue the publication of retail sales data in mid-2025, transitioning to a more comprehensive monthly report on household consumption.