The chances of an interest rate cut from the Reserve Bank became less certain yesterday.
Data out yesterday for retail sales and the trade account for September confirmed the reasons the reluctance the Reserve Bank showed for not cutting rates at Tuesday’s meeting – in short the economy is starting to do much better than it did mid-year.
The Bureau of Statistics reports showed that consumers and exporters were more resilient than many of the worryworts in the economy had though or given them credit for.
Retail sales grew for a second straight month in September, marking a 15th gain in the past 16 months. Retail sales rose 0.4%, seasonally adjusted, month-to-month in September, matching the gain in August and a solid rebound from the surprise 0.1% fall in July.
Retail sales add to recovery signs
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On the more reliable trend basis, the ABS said retail sales rose 0.3% in September after similar rises in both August and July.
And the ABS said the quarter-on-quarter gain in retail sales was 0.6%, down a touch from the 0.7% rise in the June quarter, but enough to get economists thinking of a quarter of solid consumer spending.
The data shows retail sales growth was again above average in NSW (but slowing a little) and Victoria, it continues to lag in Queensland and WA in part reflecting the end of the mining boom. House prices in both states remain weak, house prices are falling in Perth, down 2.8% in the three months to October.
The bureau said that seasonally adjusted there were rises in household goods retailing (1%), cafes, restaurants and takeaway food services (0.9%), food retailing (0.3%), other retailing (0.4%) and clothing, footwear and personal accessory retailing (0.2%). Department stores fell 2%, but they contribute less each month than the cafes and restaurants group.
And separate data on the Australian trade account confirm a better than expected September was experienced. In fact for all the talk of doom and gloom in commodities, the Australian mining and export sector seems to be holding up pretty well too, enabling the September trade deficit to shrink more than anticipated.
Exports were up 3% from August to $A27.4 billion, while imports rose only 2% to $A29.75 billion – helped by the 5% slide in the value of the Aussie dollar in the month.
The trade deficit for the month was $A2.317 billion, smaller than estimates of $A2.9 billion and narrowing from the prior month. With the August deficit revised down from $A3.1 billion to $A2.7 billion.
That plus the stronger retail sales performance and building approvals saw economists upgrade the early forecasts for 3rd quarter GDP growth to around 0.6% to 0.8%, compared with the weak 0.2% rate in the three months to June.
All this is very much consistent with the RBA’s upbeat statement on Tuesday’s in which Governor Glenn Stevens talked of the “moderate expansion in the economy”.
"The prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate at this meeting,” Mr Stevens said in his post meeting statement yesterday. The data yesterday underlined that cautious confidence.
