Australians keep shopping in promising sign for Christmas

[SYDNEY] Australian retail sales boasted a third month of solid growth in October as shoppers spent big on household goods and at department stores, a promising sign for the all-important Christmas period.

Coupled with record demand for new cars it suggested consumers were doing their bit to help offset weakness in mining. Household consumption accounts for 56 per cent of annual economic output, mining less than 9 per cent.

Friday's data from the Australian Bureau of Statistics showed retail sales rose 0.5 per cent in October from September when they increased by 0.4 per cent.

A booming property market helped drive a 1.1 per cent rise in household goods for a second month of strong gains, while sales at department stores jumped 3.5 per cent.

That was positive news for growth as the retail industry accounts for A$290 billion of Australia's A$1.6 trillion (S$1.63 trillion) of annual economic output, and is the second biggest employer with 1.25 million workers.

Consumers have also had the confidence to splash out on big ticket items, with sales of new vehicles in November jumping to a record for that month.

Sales of sports utility vehicles (SUV) were up over 16 per cent on last year, while a surge in demand for commercial vehicles hinted at a much-needed pick up in business investment.

Rising home prices have boosted household wealth - the country's housing stock is worth around A$5.6 trillion - while surprisingly strong employment growth has supported spending power even as wages remained subdued.

The Reserve Bank of Australia (RBA) cited signs of an acceleration in household consumption as one reason for keeping interest rates unchanged at 2 per cent this week.

Unexpected strength in spending had already helped economic growth perk up to 2.5 per cent for the year to September, putting Australia ahead of almost all its peers.

Still, the retail sector is not without its troubles. While a lower local dollar has made imports dearer, intense competition has prevented many retailers from being able to pass on the full costs and has squeezed margins instead.

The pressure has taken a heavy toll on some. Electronics chain Dick Smith Holdings saw its shares dive 40 per cent this week after poor sales forced it to write off A$60 million of inventory.

The retailer announced plans for a clearance sale with discounts of up to 70 per cent, which could prompt other chains to cut prices in return.

REUTERS