Felicity Emmett, Head of Australian Economics at ANZ, takes a note that Australian retail sales exceeded expectations again in October suggesting a better start to Q4 spending as solid consumer confidence and ongoing strength in house prices are providing a positive backdrop, clearly offsetting the headwinds from persistently soft income growth.
Key Quotes
“Nominal retail sales rose a solid 0.5% m/m in October, above market expectations, and building on 0.6% gains in both September and August. Sales are now growing at an annual rate of 3.5%.”
“Food sales rose a strong 0.6% m/m, while household goods sales were up a solid 0.7% after the sharp 2.6% rise in September. The volatile department store category fell 1.9%, while weakness in clothing sales continued (-0.4%).”
“The broad-based nature of the improvement in sales over recent months is encouraging. Sales in NSW are up 6.9% on a three month annualised basis, while sales in Victoria and Queensland are each up a strong 9.1%. Not surprisingly, sales growth remains soft in WA at 1.8% (3m annualised) although this is up significantly up from the -1.4% rate three months ago.”
“For the RBA, the upside surprise in retail sales would be encouraging, given the string of disappointing data over the last month or so. It suggests that growth in household spending has accelerated, and that the loss of momentum in the economy in Q3 (if current forecasts for GDP are correct) is likely to be temporary.”
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