Sunday, August 4, 2013

Weak retail sales strengthen rate cut chance

Retail

Getting weaker ... clothing retailers struggled in June. Photo: Tamara Voninski

Retail sales have remained flat in June as the industry called for another interest rate cut to boost spending, as turnover rose at restaurants and for household goods but fell in retail and clothing.

Retail sales were flat at 0.0 per cent for the month, after a revised 0.2 per cent growth in May and a decline of 0.1 per cent in April.

Economists were expecting a rise of 0.4 per cent in June.

Retail sales for June ... flat.

Retail sales for June ... flat. Photo: Bureau of Statistics

The Australian dollar fell to a fresh three-year low of 88.58 US cents after the weaker-than-expected figures.

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"An August rate cut looks even more in the bag after this data," Moody's Analytics associate economist Katrina Ell said. Financial markets are pricing in a 91 per cent chance of a rate cut at the RBA's board meeting tomorrow.

"Households aren't responding to rate cuts the way they traditionally have. Retailers are struggling as households continue to pay down debt rather than markedly increase discretionary spending."

'Soft patch' for economy

NAB's head of Australian economics, Rob Brooker, said the latest figures were a further indication that the Australian economy was going through a soft patch at this time.

"There's no indication in the monthly data that there's any sign of immediate improvement for retail trade as a whole," Mr Brooker said.

"It looks like total consumption for [the second-quarter] is pretty much on the weak side. ... Retailing is broadly weak - both of value and of volume, and it suggests that margins are continuing to be under pressure."

Retail sales have remained flat in June as the industry called for another interest rate cut to boost spending, as prices rose at restaurants and for household goods but fell in retail and clothing.

Food retailing was the strongest contributor to growth, rising 0.2 per cent in trend terms over the longer term, the Bureau of Statistics said today.

Retail sales in NSW were flat at 0.0 per cent for the month, but rose in Victoria by 0.1 per cent and 0.3 per cent in South Australia. Retail sales also lifted in the ACT by 1.3 per cent and Queensland by 0.1 per cent.

Turnover fell in Western Australia by 0.4 per cent, and also eased in the NT by 0.4 per cent and Tasmania by 0.1 per cent.

Total retail turnover grew a seasonally adjusted 1.1 per cent over the year to June 2013.

Call for further rate cuts

The Australian Retailers Association (ARA) and the National Retail Association (NRA) both urged the Reserve Bank to ease rates again at its board meeting tomorrow.

"The sensible course of action is to cut rates to boost consumer confidence, contain the unemployment rate and prevent further soft trade results," NRA chief executive officer Trevor Evans said.

Financial markets were pricing in a 91 per cent chance of a further easing tomorrow. A 25 basis points cut would take the cash rate down to a 53-year-low of 2.5 per cent.

RBA governor Glenn Stevens said last week at a Sydney speech that households' spending behaviour had changed in recent years after a 30-year consumption boom.

"Since 2009, trend growth in per capita consumption has been about 1.4 per cent per annum, half what it had been from 1995 to 2005," Mr Stevens said.


http://www.canberratimes.com.au/business/the-economy/weak-retail-sales-strengthen-rate-cut-chance-20130805-2r8py.html
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