Australian retail sales soft, stage set for another RBA rate cut

Australian retail sales came in weaker than expected for August setting the stage for another cut in November.

Retail sales rose 0.2% in August to a seasonally-adjusted A$21.46-B, the Australian Bureau of Statistics said Thursday. Economists surveyed ahead of the announcement had expected a 0.4% rise.

Economists say that August’s slight bounce back from weak sales in July, when sales fell 0.8% on month, showed consumers were still holding back spending even after aggressive cuts in interest rates in May and June.

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Government handouts for families, introduced midyear to offset the impact of a new carbon tax, appear to have boosted sales only slightly in recent months.

It is clear that consumers are remaining conservative and holding back on significant retail purchases. .

Even though it appears that consumers are still buying larger items like cars, which have seen a 9% rise in sales over the year to August, their overriding goals are to pay down mortgages and clean up credit card debt.

The Australian dollar (Aussie) fell sharply on the retail sales data, dropping briefly below US$1.0200. At 0315 GMT, the Australian Dollar was trading at US$1.0215.

The data add to a growing view that Australia’s overall economy is experiencing sluggish growth in recent months, led by a slowdown in the mining sector, which has been hit hard by falling iron one and coal prices.

 

Australian reported a trade deficit of A$2.03-B in August, its biggest monthly trade deficit in more than four years.

The RBA cut interest rates Tuesday by .25 of a percentage point to 3.25%, surprising most economists. It cited falling commodity prices and a high, uncompetitive Australian Dollar for the cut.

Sales were still strong in the mining-boom state of Western Australia, rising 1.45%. But if Western Australia were removed from the data, sales across all other regions were flat.

There’s nothing in today’s data that can argue against a follow-up November cut from the RBA.

 

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.

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