Retail sales shrank in lead-up to Christmas

Retail sales shrank in the lead up to Christmas, but the news was better for fashion and department stores.

Bureau of Statistics data for December showed sales across all retail sectors fell 0.2 per cent, seasonally adjusted.

The result disappointed analysts, who had expected sales to climb a modest 0.3 per cent.

However, the disappointing overall figures masked an improvement for some sectors that have been struggling in recent times.

Footwear and personal accessory retailing led the gains, with a 4.2 per cent rise, while clothing turnover climbed 1 per cent.

The gains in these areas flowed through into department store sales, which increased 0.8 per cent, seasonally adjusted.

The long suffering electronics retail sector also had a small pre-Christmas gain, with sales rising 0.2 per cent.

Hardware, building and garden supplies was another sector that had a strong December, up 2.1 per cent.

However, the news was bad for newspaper and book sales, which slumped 7.5 per cent.

Ben Jarman, a senior economist at JP Morgan, says it is a sign that people are increasingly buying some gifts, like books, online.

"So, if a lot of people are buying those online from offshore providers as Christmas gifts rather than going into conventional shopfronts to buy them, that's going to turn up as a very big but temporary drag in the numbers, so I think that's where the big downside was today," he said.

Pharmaceutical, cosmetics and toiletries also recorded a 2.8 per cent seasonally adjusted drop in sales.

The previously strong cafe and restaurant sector dropped 1.5 per cent, with takeaway food down 0.7 per cent.

Food retailers also saw weak sales - with specialised food sellers seeing turnover slump 4.6 per cent and supermarkets seeing just 0.1 per cent sales growth, but Australians were still on the turps this festive season, with liquor retailing up 1.9 per cent.

Ben Jarman says household consumption remains in the doldrums.

"This is despite of course a couple of RBA rate cuts which we got over the quarter," he observed.

"So, for a central bank that's watching how the consumer's playing out, this will not give them any sense that the rate cuts so far are resulting in a dramatic boost in household consumption, so there's probably scope for, we think, further easing to come on the basis of these numbers." The poor overall sales result drove the Australian dollar lower to 103.55 US cents by 2:05pm (AEDT), as currency traders increased their bets on another interest rate cut in the next few months.

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