Better retail sales won't prompt rate cut

A moderate rise in Australian monthly retail sales is unlikely to move the central bank's position on interest rates, economists say.

Official data released on Monday showed that Australian retail spending rose 0.5 per cent in September, just above expectations for a 0.6 per cent rise.

Over the September quarter, retail sales fell by 0.1 per cent to $63.797 billion in seasonally adjusted volume terms.

CommSec chief economist Craig James said the data provided little direction in terms of what the Reserve Bank of Australia (RBA) might do with the cash rate at its meeting on Tuesday.

"Retail trade was a bit higher than expectations, but if you look at sales in the September quarter, they fell slightly," he said.

"So it's not an inspiring set of figures, neither overwhelmingly positive nor negative.

"It hasn't changed our expectations for a rate cut tomorrow - it's still a 50-50 call."

However, he said a rate cut could provide some momentum going into Christmas and the New year.

National Australia Bank senior economist David de Garis said the figures suggest there are some signs of life in retailing.

"It was a little bit stronger than what we thought it would have been, based on our own NAB survey and industry sources," he said.

"Although not every category increased, you had a bit of a pull-back in clothing and specialty stores.

Mr de Garis said he doesn't expect there will be a turnaround in the retail sector any time soon.

"I doubt it, the employment situation is still quite tenuous, job ads are suggesting that businesses are watching their costs and cutting down on recruitment," he said.

"The job market is more brittle than it was a year to 18 months ago."

Mr de Garis said the international trade figures were a mixed result.

"There was a decline in imports but exports fell to," he said.

JP Morgan Australia chief economist Stephen Walters said the rise in retail sales was a decent, but not spectacular, result.

"A 0.5 rise isn't a great outcome by historical standards but it's decent enough," he said.

But he said recent rises in unemployment and a drop off in job ads, along with the high value of the Australian dollar, meant the Christmas sales period was unlikely to be as strong as retailers hoped.

"I think people are a little bit concerned about employment going forward so I wouldn't expect the sales coming into December to be that great.

"Particularly with the currency where it is; there is a big incentive for people to be buying online and offshore, rather than through the domestic retailers."

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    0.9347-0.0012-0.12%
    AUDUSD=X
    0.5566-0.003-0.54%
    AUDGBP=X
    0.6755-0.0022-0.32%
    AUDEUR=X
  • Commodities
    Commodities
    NamePriceChange% Chg