The early 2014 data suggests that the Australian economy seems to have stepped a pace from the surprisingly strong level of growth seen at the end of 2013.
Property sales, building approvals and the stockmarket all seem to be doing well (the market has shaken off the sharp fall in January, despite the uncertainty about events in Ukraine).
Yesterday the January retail sales data showed a strong 1.2% jump in seasonally adjusted terms in the month (versus an 0.4% rise forecast by economists), while the December month’s original estimate of an 0.5% rise, was revised upwards to 0.7%.
January was the fourth good month in a row and the strongest single month sales for four years.
For that we can thank the Reserve Bank and its rate cuts since late 2011 – they are finally putting some gas into the economy.
Total retail spending was $22.925 billion in January, up from $22.655 billion in December, the Australian Bureau of Statistics said yesterday.
And the Bureau said Australia’s trade surplus was $1.433 billion in January, following a surplus of $591 million in December.
The December figure was revised from a surplus of $468 million. Economists also missed the mark here with a deficit of $100 million forecast. Ooops!
The January surplus was the largest since the $2.102 billion surplus recorded in August 2011 and exports rose 4% against a 1% rise for imports.
Trade surplus highest since 2011
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In fact, despite some analysts claiming it was ‘too early’ to say if the good times were back for retailers, the fact is retail sales have been growing strongly since midway through 2013. Those analysts and economists are a bit behind the times.
In the three months to January, retail sales grew by more than 10% in seasonally adjusted terms against a 1.6% pace in the three months to June 2023.
In trend terms retail sales rose 4.6% in the year to January, according to the ABS, much faster than the 3% plus annual rate a year ago and the 2.1% rate mid year.
Both exports and retail sales/household consumption were the major drivers in the strong 0.8% rise in GDP in the December quarter. Exports contributed 0.6% and retail sales 0.6%.
Retail sales breaking out after a four year malaise
Source: ABS, AMP Capital
The AMP’s Dr Shane Oliver wrote yesterday that:
"Retail sales rose a much stronger than expected 1.2% in January, marking their ninth consecutive increase.
"What’s more the gains were broad based with particularly good gains for department stores unlike the December result which was heavily dependent on higher food prices.
"Retail sales are now up 6.2% on where they were a year ago, which is the fastest rate of annual increase since November 2009.
"It’s looking increasingly that, thanks to a combination of lower interest rates and rising wealth levels and a modest improvement in consumer confidence, retail sales are at last throwing off the malaise they have been in since 2010.
"While the pace of growth may settle back towards 5% this year, the environment for retailers has clearly improved," he said.
On the trade performance, he wrote:
"The trade surplus came in $1.4bn in January with exports up strongly and imports down.
"This was way above market expectations for a $100 million surplus and is the biggest surplus since August 2011 which is a pretty good outcome given the fall in our export prices which has occurred since then.
"The huge increase in the trade surplus likely involves a bit of noise (eg the $425m rise in non-monetary gold exports) but the improving trend since 2012 is clearly evident.
"The silver lining to the end of the mining investment boom is clearly becoming evident. Not only is it boosting resource exports as new projects start producing but falling mining investment is helping drive a decline in imports of mining related equipment (capital goods imports fell 9% in January)," according to Dr Oliver.
The upshot of the solid data was a rise in the value of the Aussie dollar well past 90 USc yesterday, and a rise in the speculation of the next interest rate movement – upwards!
"The latest retail sales and trade data coming on the heels of stronger than expected GDP growth in the December quarter last year add to evidence that other sectors of the economy are starting to fill the gap left by the slump in mining investment," Dr Oliver wrote.
There is no need for the RBA to cut interest rates again.
"Rather the debate will start to shift to when the first rate hike will come, which we still see as being later this year," Dr Oliver forecast yesterday.
