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Weak Australian retail sales, job slowdown point to third RBA rate cut
[SYDNEY] Australian retail sales disappointed yet again in May and job vacancies fell from record highs, adding to signs of an underpowered economy and bolstering views the country's central bank may have to cut rates for a third time this year.
Thursday's data from the Australian Bureau of Statistics (ABS) showed retail sales rose a pedestrian 0.1 per cent in May after falling 0.1 per cent April, and below analysts' forecast of a 0.2 per cent gain.
The weak outcome, led by food retailing, department stores and clothing, point to another quarter of slow economic growth after momentum eased in the second half of 2018.
Household consumption has been a major source of worry for the Reserve Bank of Australia (RBA) as miserly wage growth and falling home prices eat into spending power in a sector that accounts for 56 per cent of the economy.
That was a major reason the RBA last month cut its benchmark cash rate for the first time since August 2016. It quickly followed up with a second cut to an all-time low of 1.00 per cent this week in the hope of reviving growth and inflation.
Financial markets are pricing in a near 90 per cent chance of a third cut to 0.75 per cent before Christmas. With another 25-basis-point easing already in the price, the local dollar barely moved at US$0.7037.
"Although the RBA would prefer it not to be the case, our forecasts suggest the heavy lifting on policy will still need to be done by monetary policy," said Citi economist Josh Williamson.
"The key to our view on monetary policy is that the economy will continue to operate with excess capacity for longer than previously expected."
Underscoring that view, the number of job vacancies fell 1.1 per cent in the three months to May to 241,500 from 244,200 in the Dec-Feb quarter, the first decline since February 2016, separate data from the Australian Bureau of Statistics (ABS) showed.