Retail sales were surprisingly brisk in October as the first of the Reserve Bank rate cuts fed through the economy. New South Wales, though, continued to lag, with demand sinking for a 10th straight month.
Nationally, monthly retail sales increased a seasonally adjusted 0.7% in October from a revised 1% contraction in September, Australian Bureau of Statistics figures show, as recession fears failed to deter consumers from shopping malls. Analysts expected retail sales to shrink by 0.2% in October.
''At the margin these figures may be encouraging to the extent they suggest households aren't consolidating as much as people had thought,'' said ANZ economist Riki Polygenis. ''But you must keep them in perspective because they only partly unwound the 1% fall in retail sales in September.''
Ms Polygenis also urged caution in interpreting the number because of the ABS's reduced sample size.
The stronger-than-tipped retail spending figures will give some heart to the RBA as the board meets today to consider another slashing to its key cash rate to avert a recession. Economists expect the central bank will lop another 75 basis points from the cash rate, lowering it to 4.5%.
Investors, though, are tipping the RBA will reveal an even bigger cut, to as low as 4% by chopping them a record 125 basis points, or 1.25 percentage points when it releases its decision at 2.30 pm, AEDT.
Mixed trends
In trend terms, retail sales in October eked out a 0.2% increase to $18.4 billion, matching the pace repeated for the previous five months.
Food retailing gained 0.6% in October, while ''other'' retailing, which includes recreational goods, jewellery, and sport equipment, added 0.8% in trend terms, the ABS said.
Restaurants and cafes saw a decline in sales, dropping 0.6%, in trend terms, and household goods sank 0.7% in the months.
State by state, retail sales advanced by 0.4% for the month in trend terms in Victoria, Western Australia and the Australian Capital Territory, while Northern Territory's retail sales shot up 0.8%.
Sales in trend terms in NSW eased 0.2% in October, while those in Queensland gained 0.2% in the same period. Tassie sales nudged up by 0.1%.
''The trend estimate has been in decline in New South Wales for ten months,'' the ABS said in its release. ''Both Queensland and Tasmania have had two months of weak trend growth.''
RBA switch
The October sales figures came after the RBA switched direction on its interest rate movements in September, when it made the first of a series of rate cuts.
Commercial lenders have passed on most of the 200 basis-points in cuts since then, leaving borrowers with more cash after repaying their loans. Cheaper fuel at the bowser has also helped bolster consumers' disposable funds.
There was also brighter news on Australia's international trade position with the current account deficit narrowing to $9.74 billion in the September quarter from $14.04 billion in the previous quarter.
The data feeds into the September quarter gross domestic product which is due for release on Wednesday.
BusinessDay, with AAP