Debbie won't go away

Cyclone provides bounceback in sales

ECONOMISTS have shrugged off a surprise bounce in retail spending, with the numbers seen as an aberration flowing from the impact of Cyclone Debbie and shifting timing for Easter.

They expect fundamentals to remain challenging, with weak wages growth and high underemployment likely to continue to drag on consumer spending in coming months.

Figures released yesterday by the Australian Bureau of Statistics show retail spending rose 1 per cent to $25.89 billion in April, adjusted to account for seasonal factors.

That surpassed market expectations for a modest 0.3 per cent rise.

The rebound followed a weak trend the previous two months, with revised ABS data showing retail sales fell 0.2 per cent in March and were flat in February.

National Australia Bank economist Ivan Coulhoun pointed to two factors driving the result.

First, there was a substantial 2.4 per cent bounce-back in retail sales in Queensland, which had been significantly impacted in March by Cyclone Debbie. Secondly, the significant change in seasonality this year – with the Easter holiday period falling in April, compared with March last year.

April’s spending gains were helped by stronger business at department stores and a lift in sales by cafes and restaurants.

Cafes, restaurants and fast food sales were up 1.1 per cent and food retailing rose 1.2 per cent, while department store sales increased 2.5 per cent.

“We suspect these rises were partly from stronger Easter-related trading,” Citi economist Josh Williamson said.

Some of it could also be partly explained by households restocking food and some durable items following cyclone-related floods that affected about 20,000 homes in late March, Mr Williamson said.

Increased curbs on mortgage lending and higher home loan interest rates indicated there would be some pressure on future household goods retailing, he said.

The strong numbers come amid concern consumers have been shying away from spending because of a heavy household debt burden and soft wages growth.