Australia retail sales disappoint for 3rd month running

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Published: July 3, 2015 8:28:23 AM

Australian retail sales rebounded in May but still missed expectations for a third straight month, a blow to hopes for a sustained and much-needed pick up in consumer spending.

Australian retail sales rebounded in May but still missed expectations for a third straight month, a blow to hopes for a sustained and much-needed pick up in consumer spending.

Retail sales rose 0.3 percent in May from April, when they dipped 0.1 percent, data from the Australian Bureau of Statistics showed on Friday.

That was short of the 0.5 percent increase forecasted by analysts and left consumption looking soft mid-way through the second quarter.

It will also be a disappointment to the Reserve Bank of Australia (RBA) which cut interest rates to an all-time low of 2 percent early in May, aiming in part to boost consumer spending at a time when mining investment is on the wane.

Markets responded by nudging the local dollar down a quarter of a U.S. cent to $0.7605 and slightly narrowing the odds on a further easing in rates.

The central bank holds its July policy meeting next week and is considered almost certain to hold steady as its judges the effect of its moves in May and February.

A retail revival is very much needed as the industry accounts for A$288 billion of Australia’s A$1.6 trillion ($1.22 trillion) of annual economic output, and is the second biggest employer with 1.25 million workers.

There had been reason to believe consumers would be more free with their cash given a run of upbeat jobs data and a drop in the unemployment rate had brightened the national mood.

Also helping was the government’s May 12 budget, which offered immediate tax breaks for small businesses that bought new equipment from cars to mobile phones.

The news went down well with retailers and households. A weekly survey of consumer sentiment from ANZ and Roy Morgan has shown a clear rising trend since the budget, with its index up 2 percent last week alone to its highest in 18 months.

“Importantly, the sub components of the index relating to the economic outlook, which had previously been very weak, are rising strongly,” says ANZ chief economist Warren Hogan.

“What is critical now for the Australian economy is this emerging consumer confidence to be sustained and translated into steady consumer demand and ultimately business confidence.”  ($1 = 1.3156 Australian dollars)

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