Exports continued to perform in April, building on the strong performance in the three months to March which helped drive GDP up by 1.1% from December. At the same time retail sales grew – not by as much as expected – but by enough to keep the tills ticking over.
With building approvals back in positive ground, house prices rising, the economy continues to travel well – in fact better than many gloomsters are willing to admit.
On top of this, lending to business grew by the strongest (7.4% in the year to April) since the GFC, a very big positive and one that the Reserve Bank is watching closely. Home lending, especially to investors, continued to slow in April (0.3% month on month and 6.5% annual), well under the 10% limit imposed by regulators.
In fact judging by the early data for April, the economy solid first quarter growth has spilled over into the start of the second quarter.
The 0.2% in retail sales in April from March (when sales rose 0.4% from February) left sales up 3.4% from a year ago, which is down from the 4% growth rate at the start of the year.
The Bureau of Statistics said that in seasonally adjusted terms, there were rises in cafes, restaurants and takeaway food services (1%), household goods retailing (0.3%), clothing, footwear and personal accessory retailing (0.5%), other retailing (0.2%) and department stores (0.4%). Turnover in food retailing fell 0.3% in April 2016, thanks to continuing price deflation in fruit and vegetables.
In seasonally adjusted terms, retail sales rose 0.3% in NSW, 0.6% in WA, 0.5% in South Australia, 1% in Tasmania, 0.9% in the ACT and 0.7% in the Northern Territory. The ABS said there were falls in Victoria (-0.3%) and Queensland (-0.1%)
The trend estimate for Australian retail turnover rose 0.2% in April following similar sized rise in March.
On an annual basis, retail sales growth remains relatively strong in NSW at 5% and Victoria 4.3% year on year. But as expected they remained soft in Queensland where sales grew by just 1.2% in the year to April and 2% in WA.
The AMP’s Chief Economist Dr Shane Oliver says, “While there has been a clear loss of annual momentum in retail sales since 2014, this appears to relate more to slowing retail inflation.
“There has also been a shift in relative demand towards services such that overall consumer spending remains solid (up 3% over the year to March in volume terms),” he said.
"This is likely to remain the case as competitive pressures keep retail inflation down (eg, the increasing competition between supermarkets) but overall consumer spending volumes remain supported by okay employment growth, ultra-low interest rates and a still high savings rate,” Dr Oliver wrote yesterday in a note.
Meanwhile the improvement in our trade performance continued in April for the 4th month in a row as more exports of LNG were reported.
April’s trade deficit narrowed further falling to $1.6 billion, down sharply from the all time high of $3.9 billion in December last year.
Dr Oliver said yesterday this "was much better than expected. While a surge in resource export volumes after the completion of various mining and gas projects has played a big role here, last month it was driven by higher rural exports and services exports.
"With commodity prices stabilising recently and gas exports set to rise even further we may have seen the worst for the trade deficit for now.”
