Most economists believe the Reserve Bank will leave official interest rates on hold next week, despite yesterday's conflicting economic data.
Retail sales grew twice as much in May as tipped, increasing 1per cent to $15.5billion seasonally adjusted, but building approvals slumped by 12.5per cent to 9953 dwellings. The value of those approved buildings fell, too, by 12.3per cent.
There was also evidence the manufacturing industry continued to weaken in June, although the pace of decline eased slightly. The Australian Industry Group-Pricewater-houseCoopers manufacturing index rose by 0.9 points to 38.4, but remained below the 50-point mark that separates expansion from contraction.
The Department of Education, Employment and Workplace Relations' skilled vacancy index declined by another 3.7per cent in June to be 61.5per cent down on a year ago. Professional vacancies were down 5.2per cent, trades down 2.3per cent and associate professionals down 8.9per cent.
Its internet vacancy index dropped 3.4per cent for May, although the ACT was one of three jurisdictions to record a rise of about 0.3per cent.
TD Securities senior strategist Annette Beacher one of the few who believes a rate cut is ''well and truly on the table'' on Tuesday predicted next week's figures would show unemployment increased to 5.9per cent in June.
''The continued collapse in job ads suggests that Australia is on track to post an unemployment rate of nearly 8per cent by year end. As GDP flat lines and unemployment surges, we believe the RBA will be prompted into lowering the cash rate, from the highest real cash rate in the developed world,'' Ms Beacher said.
She also tipped a coming ''correction'' to the retail sector.
''That upbeat retail sales is the product of stimulatory fiscal policy. Those $900 Rudd cheques can only be spent once,'' she said.
Yesterday's Australian Bureau of Statistics figures showed the ACT had the second highest retail sales growth, at 1.8per cent.
St George chief economist Besa Deda said all national retail industries, except household goods, increased in May, and department stores sales rose 5.5per cent.
''The most encouraging aspect of [this] data is that spending in discretionary areas was buoyant. It suggests that consumers may be losing some of the shackles of cautiousness that bound them during much of the global financial crisis,'' she said.
ANZ economists said consumers were responding to government cash hand-outs, but ''the effectiveness of policy measures on building activity is less clear''.
The big fall in building approvals was largely because units suffered the largest fall on record, dropping 43.6per cent to their lowest levels since 1987, although detached houses fell 2per cent, too.
The ANZ's economists said that yesterday's results highlighted that ''there is still potential downside to the economy in 2009 before a more sustainable recovery in 2010''.
''While the RBA will be encouraged by the strength in retail sales, the sharp fall in building approvals raises some questions about whether housing will be contributing as much to economic growth as originally though, at least in 2009,'' they said.
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