Retail spending growth seems to be slowing a bit, but no more than might have been expected, and there is no good reason to expect the deceleration to continue.
The monthly rise of 0.3 per cent in March reported by the Australian Bureau of Statistics was half the average of the previous two months, which was less than economists’ expectations of a 0.4 per cent rise.
Australian consumers spent $24.126 billion in March, compared to $24.063 billion the month before, according to official figures out Wednesday.
Over the March quarter, retail sales were up by 0.7 per cent to $69.789 billion in seasonally adjusted volume terms.
The Australian dollar bottomed out against the euro in December and its steep five month decline against the yen and the US dollar effectively ended in February.
The inflationary impulse of that depreciation should have already begun to fade and it’s likely that at least a part of the softer March retailing figures can be traced to that source.
With the Aussie dollar’s subsequent recovery, some downward bias to the monthly retail trade figures seems likely in the coming couple of months as well.
Another factor weighing on the retail numbers is the trend in housing finance, an important ingredient in the propensity of households to open their wallets.
While still strong, the trend at the last measure by the ABS in February was growing at an annualised rate of about nine per cent, down from a 15 per cent pace six months earlier.
That downshift would be consistent with slightly softer momentum in retailing.
Even so, given the inflationary effect of the falling exchange rate was always going to be temporary, and the negative effect of slower growth in housing finance was only mild, there is no reason to expect the hint of weakness in retailing in the March figures will become any more pronounced.
Beyond that, there are good reasons to expect consumer spending to continue to plod along at a reasonable clip.
They include a run of strong employment growth figures reported by the bureau, news from the Housing Industry Association on Wednesday that new home sales hit a four year high in April, windfall gains from rising housing prices, a downtrend in the housing saving ratio since mid-2013, and the Reserve Bank’s latest interest rate cut.
AAP
