So retail has enjoyed a big run up since the middle of 2012 and some analysts have been wondering if the gains are all in the bag. Perhaps they and investors should think again because two months of data from the Australian Bureau of Statistics is starting to suggest there could be more to come for the sector – retail sales gains of a restated 1.2% in January and 1.3% (seasonally adjusted) for February are starting to tell us consumers are spending.
And for those thinking of further interest rate cuts – pine no more. No more rate cuts will happen unless there’s a crisis in Europe or China (for example). But don’t think rate rise yet because as far as the Reserve Bank is concerned, inflation remains under control and within the central bank’s 2% to 3% target, and as long as that’s the case, the hands in martin Place will remain off the lever.
The solid rise in retail sales for a second month tells us the rate cuts from the RBA are finally spurring increased activity in the sluggish bricks and mortar retailing sector in this country (this should shut up the rent seekers and other moaners). Along with a sharp improvement in the February trade balance (which fell by more than a billion as reported by the ABS yesterday, and failed to get significant coverage this morning), and solid gains for car sales in march with another 97,000 plus vehicles sold, and that big gain in jobs in February, the latest data will end talk of another cut in the cash rate from the current 3.0% level.
Barring an offshore crisis in Europe or China, the RBA’s rate cutting is over and so long as inflation remains under control, we won’t see a rise. The RBA Governor, Glenn Stevens said in this week’s post board meeting statement the bank sees inflation between 2% and 3% for the ”next one to two years”, indicating the central bank is comfortable where the economy and rates are now heading.
The market had been looking for a 0.3% rise in retail sales, so the actual gain of 1.3% was well above all expectations. Economists had been looking for a gain of 2.5% in building approvals, so the 3.1% was a bit of an overshoot.
The Australian Bureau of Statistics reported this morning (http://www.abs.gov.au/ausstats/abs@.nsf/mf/8501.0?OpenDocument) that retail sales rose an estimated 1.3% in february (seasonally adjusted), after a restated 1.2% rise in January (0.9% originally) and a restated 0.5% fall in december (a fall of 0.4% previously).
It was the biggest monthly rise in retail sales for more than a year and surprised the market, with the dollar climbing closer to $US1.05 as traders wound back their hopes for a rate cut and switched their spiel to ‘rate rise looms’. The dollar rose half a cent after the news was released at 11.30 am.
On a trend basis the sharpness of the surge in sales can be seen. The ABS said retail sales rose an estimated 0.4% in February 2013. This follows a rise of 0.3% in January (0.1% previously) and a rise of 0.3% in December 2012 (no rise previously).
The ABS said the rise in retail sales was broadly spread with gains in "Household goods retailing (0.7%), Food retailing (0.3%), Clothing, footwear and personal accessory retailing (0.8%), Cafes, restaurants and takeaway food services (0.3%) and Other retailing (0.2%)." Department stores were the only negative, seeing a fall of 0.1%.
The ABS also said that apart from a fall of 0.2% in South Australia and no growth in WA, all other states saw rises. "Queensland (0.6%), New South Wales (0.4%), Victoria (0.4%), Tasmania (0.6%), the Australian Capital Territory (0.4%) and the Northern Territory (0.2%).
And building approvals (http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/8731.0Media%20Release1February%202013?opendocument&tabname=Summary&prodno=8731.0&issue=February%202013&num=&view=) saw a continuation of the gains in private housing. They were up 0.5% in february (seasonally adjusted) after the previously reported 3.2% gain in January. in trend terms the was no rise, but that was an improvement on the weakness in January.
Overall approvals were up 3.1% in the month after two months of falls. The rise was due to 1.5% seasonally adjusted increase in the volatile flats and units sector. They remain 24% higher over the year to February, while private housing approvals were up 2.3% after being down 2.1% in the year to January.
The ABS said dwelling approvals"increased in February in South Australia (23.0 per cent), Western Australia (5.3 per cent), Queensland (3.8 per cent) and Victoria (0.3 per cent) but decreased in New South Wales (-7.7 per cent) and Tasmania (-5.8 per cent) in seasonally adjusted terms.
"In seasonally adjusted terms, approvals for private sector houses rose 0.5 per cent in February. Private sector house approvals rose in South Australia (9.9 per cent), New South Wales (7.8 per cent) and Victoria (6.3 per cent) but fell in Queensland (-7.7 per cent) and Western Australia (-6.4 per cent)."
