(Bloomberg) -- Australian retail sales rose by less than expected in November despite pre-Christmas and Black Friday discounts, underscoring the cautious consumer mood and further bolstering the case for an interest rate cut next month.
Sales advanced 0.8% from the prior month, lagging a forecast for a 1% gain, figures from the Australian Bureau of Statistics showed on Thursday. The outcome follows a downwardly revised 0.5% increase in October.
In response, the Australian dollar weakened briefly after the data while three year bonds pared declines. Money market pricing implies a better than 70% chance the Reserve Bank will pivot to an easing cycle at its first meeting of the year in February.
“The weaker-than-expected retail trade figure, combined with yesterday’s soft underlying inflation, reinforces our view for a February RBA rate cut,” said Carol Kong, an economist and currency strategist at Commonwealth Bank of Australia. “The upcoming US economic data releases are the next event risks,” she said.
Retail sales — an important consideration in policy decisions as consumption accounts for more than half of gross domestic product — have now risen for eight straight months and some economists said that suggests that the worst is over for Australia’s consumer.
“The retail outlook is not completely out of the woods yet. Keep in mind that these improvements were from a very low base,” said My Bui, economist at AMP Ltd. “Overall, we take today’s data as relatively neutral in terms of implications for the RBA.”
The RBA has highlighted the outlook for household spending as a key uncertainty as it held the target rate at more than a decade high of 4.35% last year while neighbors including New Zealand started easing.
Minutes of the December meeting showed policymakers are more confident that inflation is moving sustainably toward target but it’s still too soon to conclude the battle is won.
Poor consumer outlook is a worry for Prime Minister Anthony Albanese ahead of an election due by May 17. Albanese’s center-left Labor government is lagging in polls as the electorate is frustrated with cost of living pressures and high borrowing costs.
The retail data also showed:
- Sales rose 3% from a year earlier, faster than the 2.2% pace in November 2023.
- All retail categories from food to department stores and clothing rose in November
- Department stores led the gains, up 1.8%, followed by clothing, food and accessory, which rose 1.6% and cafes, restaurants and takeaways, gaining 1.5%
The ABS intends to cease the publication of retail sales data from mid-2025. It is switching to a more comprehensive monthly report on household consumption that will be released Friday.
--With assistance from Shinjini Datta, Yoshihiro Sato and Masaki Kondo.
(Adds comments from economists in fourth and sixth paagraphs.)
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