Australia sales surge boosts GDP outlook
Consumer spending has been under pressure from record household debt and sluggish wage growth
Australian retailers enjoyed their best sales in a year last quarter as discounting drove goods off the shelves, suggesting consumer spending helped the economy maintain momentum.
Friday’s figures from the Australian Bureau of Statistics (ABS) showed retail sales for the June quarter jumped 1.2 per cent in inflation-adjusted terms, the best outcome in a year. That beat expectations of 0.8 per cent and followed a very sedate 0.2 per cent gain the previous quarter.
The revival greatly improved the outlook for second quarter gross domestic product growth, given household spending accounts for around 57 per cent of annual economic output.
Retail sales likely added almost A$1 billion (Dh2.71 billion) to GDP last quarter and may have contributed 0.6 percentage points to growth compared with a meagre 0.2 percentage points in the first quarter.
“The second quarter rise in real retail sales is encouraging especially when the evidence suggests that non-retail spending, excluding vehicles, has also been fairly strong,” said Paul Dales, chief economist at Capital Economics.
The data will also provide some comfort to the Reserve Bank of Australia (RBA) which has repeatedly singled out household consumption as a “continuing source of uncertainty.” Still, there were no signs of inflation in the report as retail prices fell 0.1 per cent in the quarter. For the month, retail sales gained 0.4 per cent in June, unchanged from May’s pace and compared with a 0.3 per cent rise economists had predicted.
The gains, helped by financial year-end sales and winter shopping, were broad-based across sectors with big jumps in clothing, footwear and personal accessory as well as household goods and food.
Patchy growth
Consumer spending has been under pressure from record-high household debt and sluggish wage growth, which has in turn weighed on inflation — the single biggest reason the RBA is in no rush to raise interest rates from record lows.
The central bank is all but certain to keep rates at 1.50 per cent at its monthly policy meeting this week.