Australia retail sales jump for 3rd month in welcome relief for economy

[SYDNEY] Australia's retailers enjoyed another jump in sales in October, an outcome that augurs well for momentum in consumer spending going into the all-important Christmas shopping period.

The 0.5 per cent rise for October beat market forecasts for a 0.3 per cent uptick and marked the best three month period for sales since mid-2014. That was welcome news after a run of disappointing figures this week suggested the economy had all but stalled in the third quarter.

The robust numbers will help allay concerns about the risk of a more marked slowdown, or even recession, following weak numbers on business investment and construction.

Friday's data should also provide comfort to the Reserve Bank of Australia (RBA), given the retail sector has annual sales of A$290 billion (S$307 billion) and is the country's second-biggest employer with 1.25 million workers.

"It's a very solid result. It highlights that there has been a lift in overall activity. It's positive for inflation and for the economy as a whole," said Savanth Sebastian, economist at CommSec.

"The outlook for the retail sector is certainly better than it was six months ago and the Reserve Bank will be quite comfortable with these results."

The Australian economy grew a brisk 3.3 per cent in the year to June, but faces the risk of a contraction last quarter for the first time in almost six years.

Data from the Australian Bureau of Statistics (ABS) out on Thursday showed sharp cutbacks in business investment while other indicators of domestic activity such as wages growth and employment have been feeble.

Core inflation is already at a record low of 1.5 per cent and looks like staying under the RBA's target band of 2-3 per cent for some time.

"This retail sales data is probably more forward looking than the recent indicators we've had. From that perspective, it looks like the economy is still doing relatively okay," Mr Sebastian added.

Friday's data showed household goods were driving sales with electrical and electronic goods retailing climbing 1.7 per cent while hardware, building and garden supplies gained 0.5 per cent.

Sales of clothing, footwear and personal accessories dipped 0.4 per cent, likely in part due to falling prices amid intense retail competition.

The ABS also produces an experimental measure of online retail sales which was very strong in October, surging 12.6 pct to top A$1 billion for first time since the series began.

The dollar value of sales has in part been undermined by very low inflation with prices for some goods, including food and electronics, falling over the past year.

REUTERS