Once again the Reserve Bank won’t be swayed by another set of promising economic figures. The central bank will again decide to continue sitting on interest rates for the time being at its August board meeting later today.
The bank remains uncertain as to the strength of the economy, and this uncertainty will be enough to stay its hand on rates, while accepting that data on inflation, retail sales, building approvals and employment all remain moderate and unthreatening.
The AMP’s chief economist Dr Shane Oliver said yesterday in a note, "The rebound in retail sales and the continuing recovery in job advertisements provides confidence that even though June quarter GDP growth is likely to be soft, the growth outlook has not deteriorated and if anything may have improved a touch after the scare that followed the May Budget.
"So no reason for the RBA to cut rates. We expect the RBA to reiterate at its August meeting (tomorrow) that a period of interest rate stability remains prudent."
Yesterday’s retail sales data for June from the Australian Bureau of Statistics (ABS) showed a seasonally adjusted rise of 0.3%, from a revised fall of 0.3% (a fall of 0.5% originally).
That was stronger though than most market forecasts which were around a fall of up to 0.5%.
Retail sales growth well up on the post 2010 period
Source: AMP Capital
While some analysts said the budget-induced slowdown was over, the better explanation is that the arrival of winter in June with cold, wet (and snowy) conditions across large parts of Victoria, southern NSW, Tasmania and South Australia (as well as southern WA) ended the mild, warm autumn which had damaged sales growth in sectors such as clothing and footwear.
In current prices, the trend estimate for Australian turnover rose 0.1% in June following a rise of 0.1% in May.
The trend series irons out the volatility in the seasonally adjusted figure and gives a better idea of the level of growth – in this case it remains weak.
For the year, in trend terms, retail turnover rose 5.3% with June 2013.
That was due to the strong first quarter when trend sales were growing at an annual rate of more than 6%.
The ABS said food retailing (up 0.1%), goods retailing (up 0.3), other retailing (0.2%) and cafes, restaurants and takeaway food services (up 0.1%) all posted month-on-month increases in trend terms.
But clothing, footwear and personal accessory retailing and department stores all fell in trend terms in June.
In fact department stores are a basket case – the June turnover figure was the lowest since June 2008.
No wonder Myer kicked off a $50 million sale yesterday after only finishing its regular mid year sale last week.
The stock in the new sale appears to be unsold products from the regular sale.
And job ads edged higher last month, according to the monthly survey from the ANZ, slowing from the strong performance seen in June.
The ANZ said total job advertisements rose 0.3% to 133,292 per week on average in July. That followed June’s 4.4% increase and left ads up 4.2% on July last year.
"Labour demand has continued to improve this year," said ANZ chief economist Warren Hogan. "Over the past six months, each of the main job ads measures has strengthened, although the pace of the upswing remains quite moderate compared to previous turnarounds in the labour market."
Ads on the internet rose 0.4% last month, while those in newspapers fell 2.8% to continue the long running trend toward online advertising.
The July jobs data on Thursday is tipped to show between 10,000 and 17,000 new jobs with the jobless rate remaining on 6%.
In a commentary yesterday, the AMP’s Dr Shane Oliver said, "While real retail sales fell 0.2% in the June quarter, pointing to a soft June qtr GDP report, the decline was far less than the consensus expectation for -0.5%.
"More importantly, annual retail sales growth of +5.5% is well above the 2.7% average of the last few years (see chart) and the rebound in the weekly Roy Morgan measure of consumer confidence augurs well for consumer spending going forward.
"The rise in retail sales was led by household goods (+1.7%mom) whereas department stores (-0.5% mom) continue to struggle. The reversal of the “two speed economy” over the last year is highlighted by retail sales growth of 8.8% year on year in NSW and 5.9% year on year in Victoria but just 1.7% year on year in Western Australia."
And on the job ads survey, Dr Oliver said, "The ANZ job ads survey showed another 0.3% gain in July. Coming after a 4.4% rise in June this adds to the picture of forward looking labour market indicators continuing to improve, which in turn suggests we are at or very close to the peak in unemployment”.
Besides the RBA decision, the trade data for June will also be released today.
