Australian retail sales dim in Dec, but Q4 bright

[SYDNEY] Australian retail sales eased more than expected in December after a barnstorming couple of months, but still posted a smart rebound in the final quarter of 2017 in a positive sign for household consumption and economic growth.

Thursday's figures from the Australian Bureau of Statistics (ABS) showed retail sales eased 0.5 per cent in December, from November when they rose a solid 1.3 per cent led by Black Friday discounts. Economists polled by Reuters had predicted a 0.2 per cent fall.

The pullback in part reflected the impact of online discounting events in November which brought spending forward. Online sales grew 6 percent in original terms in December, after jumping 20 per cent in November.

The local dollar eased about 20 pips to US$0.7868 on the weaker-than-expected monthly number. Household goods led the falls with department stores, clothing, footwear, cafes and restaurants all posting losses.

For the fourth quarter as a whole, retail sales beat expectations to rise a rapid 0.9 per cent in inflation-adjusted terms. That followed a very sedate 0.1 per cent gain the previous quarter.

The revival greatly improved the outlook for gross domestic product growth, given household spending accounts for around 57 per cent of annual economic output.

In the third quarter, household consumption had expanded at its slowest pace since 2008, marring an otherwise respectable annual growth outcome of 2.8 per cent.

Consumer spending has been under pressure from record-high household debt and sluggish wage growth, one reason the Reserve Bank of Australia (RBA) is in no rush to raise interest rates from record lows.

The RBA is all but certain to keep rates at 1.50 per cent at its first meeting of 2018 on Tuesday.

Futures markets 0#YIB; imply around a 50-50 chance of a hike by November and are not fully priced for a rise until early next year.

IMPORTS JUMP

Other data out Tuesday showed Australia recorded a trade deficit of A$1.36 billion ($1.07 billion) in December, confounding forecasts of a A$200 million surplus.

However, November's result was revised sharply to show a surplus of A$36 million, from an initial deficit of A$628 million, in part reflecting updated prices for iron ore and coal.

Analysts noted that prices climbed further in December, suggesting that the month's export earnings would also be revised higher at a later date.

The other main surprise in the trade report was the strength of imports, which jumped 6 per cent in December.

While surging oil prices accounted for some of that, there were also solid increases in consumer and capital goods which augured well for consumption and investment.

RUETERS