Global markets up, Packer backs Kennett
Global markets stronger overnight and James Packer declares war on Echo Entertainment's chairman, John Story. Business columnist Malcolm Maiden reports.PT4M32S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-1zilj 620 349 May 30, 2012
Australian retail sales registered a disappointing result in April, with total turnover contracting for the first time in 2012. The decline sent the dollar skidding at investors raised their bets of another interest rate cut.
Sales for the month fell 0.2 per cent, defying expectations by analysts of a gain by that margin, to total a seasonally adjusted $21.256 billion, according to the Australian Bureau of Statistics.
The drop was a sharp reverse from March's revised 1.1 per cent increase in retail turnover.
Retailers continue to do it tough. Photo: Jessica Shapiro
Victoria led the decline, with sales dropping 1.6 per cent for the month, its steepest drop since June 2008. New South Wales, though, bucked the trend, rising 0.7 per cent in April.
"It was a fairly weak outcome," said National Australia Bank economist Ali Knight. "It follows surprising strength in March."
The drop in retail spending adds to evidence that the Reserve Bank was slow in cutting interest rates as it weighed up signs of patchy growth and the coming mining investment bulge. The central bank lopped 50 basis-point cut on May 1 and the market is pricing in as a certainty another reduction of at least another 25 basis points.
The dollar fell back below the 98 US-cent mark on the retail news, losing about 0.4 of a US cent to drop as low as 97.76 US cents.
"The department stores are really struggling," NAB's Ms Knight said. 'It's possible that there is heavy discounting happening without an increase in demand."
Department store sales fell 1 per cent in the month, seasonally adjusted, while food sales rose 0.1 per cent.
"Margins are being squeezed," Ms Knight said. "We're seeing it across the board."
In a separate release by the ABS, construction work done rose in the March quarter by 5.5 per cent, following a revised 3.4 per cent drop in the final quarter of 2011, according to the ABS. Economists polled by Bloomberg tipped a 3 per cent rise in the first quarter.
State by state
Among other states, retail sales in Western Australia sank 0.2 per cent, while they inched up 0.1 per cent in Queensland, the ABS said.
In Tasmania retail sales fell 0.6 per cent, matching the Australian Capital Territory’s 0.6 per cent fall in the month.
Household goods retailing dropped 0.8 per cent in April, while clothing and footwear sales slipped 0.1 per cent.
Sales at restaurants, though, rose 0.4 per cent, while other retailing dropped 0.7 per cent in the month, the ABS said.
"Retail spending is struggling to eke out a sustained improvement," said Moody's Economy.com analyst Katrina Ell.
"Despite rate cuts and the possibility of further easing, consumers remain stubbornly cautious amid the uncertain global environment and weaker conditions in the non-mining sectors."
"We are cautiously optimistic that as rate cuts filter through the economy sentiment will improve and this will flow through to retail trade," she said.
Not all economists, though, are pencilling in a June interest rate cut by the central bank.
"Some people will see the (retail) reading will add to the case for lower rates at the June meeting but I don't see it that way because there is so much cash coming in to households from the (federal) budget," said Saul Eslake, economist at Bank of America/Merrill Lynch.
"If anything, the RBA will cut after the Greek elections, not before," he said. "We think it will ease in August but we are more than willing to bring it forward to July if something blows up in Greece."
"The rise in construction work done will add to GDP but at this stage, there are so many more pieces to come including capex tomorrow, that I am not revising my forecast yet," he said.