Australian Retail Sales Match Biggest Gain Since 2011: Economy

Australian retail sales in June matched the biggest advance since April 2011 and exports fell for the first time in four months, signaling the nation’s economic growth is increasingly reliant on domestic demand.

Sales climbed 1 percent to A$21.6 billion ($22.6 billion) from a month earlier, when they rose a revised 0.8 percent that was stronger than initially reported, the Bureau of Statistics said in Sydney today. That exceeded the median forecast in a Bloomberg survey for a 0.7 percent gain. Another report showed an unexpected trade surplus in June as fuel imports declined.
Retail sales have been fueled by A$2 billion in government carbon rebates and benefit checks paid out since May, as well as four interest-rate cuts since November. Reserve Bank of Australia Governor Glenn Stevens left the benchmark rate unchanged last month, saying its 75 basis points in reductions in May and June to 3.5 percent will buttress the strongest developed economy as growth slows from India to Germany.

“It’s a great outcome for the central bank because there’s lots of sales without generating inflation,” said Michael Turner, an economist at RBC Capital Markets Ltd. in Sydney who predicted the result. “The cash handouts were very influential in what’s happened in June and there was also the rate cut at the start of the month and petrol prices were sharply weaker.”

The local dollar, which has risen 8 percent since June 1, traded at $1.0483 at 2:36 p.m. in Sydney, compared with $1.0456 before the data. Traders are pricing in a 79 percent chance Stevens will leave rates on hold at a policy meeting next week, according to Bloomberg data based on swaps trading.
Department Stores

Spending at department stores rose 3.4 percent, and consumers spent 1.8 percent more on clothing, footwear and accessories, today’s report showed. They spent 0.2 percent less on household goods, it showed.

Retail sales, adjusted to remove inflation, increased 1.4 percent in the three months through June from the previous quarter, the report showed. Economists had forecast a 0.9 percent increase.

Australia’s largest electrical-goods chain, Harvey Norman Holdings Ltd. (HVN), said lower-income areas that received rebates are outperforming richer neighborhoods, while biggest retailer Woolworths Ltd. (WOW) said less-affluent shoppers were buying Apple Inc.’s iPad.

Wesfarmers Ltd. (WES)’s Target chain, the country’s largest department-store network with 301 outlets, put in its best performance in at least 2 1/2 years in the three months through June, the company said July 26. Sales at stores open at least 12 months rose 4.5 percent from a year earlier, Wesfarmers said. The measure declined in eight out of the previous nine quarters.
Trade Balance

Today’s trade report showed exports outpaced imports by A$9 million, from a revised A$313 million deficit in May. The median estimate in a Bloomberg News survey was for a deficit of A$375 million. The April balance was revised to a A$20 million surplus from a previously reported deficit of A$26 million.

Exports were little changed at A$26.63 billion, today’s report showed. Imports declined 2 percent to A$26.62 billion on a 20 percent fall in fuel and lubricants, the report showed.

“The weakening evident in Asian manufacturing at the start of the third quarter, may see some further downward pressure on hard commodity prices over the same period,” said Glenn Maguire, principal of Asia Sentry Advisory Pty Ltd., in an e- mailed note after the data.
Resource Boom

Powering the Australian economy is the biggest resource boom since prospectors set off a gold rush in the 1850s. The latest bonanza — for iron ore, coal and natural gas — is bringing investment projects the government estimates to be worth A$500 billion. The nation’s unemployment rate, at 5.2 percent in June, is lower than 8.2 percent in the U.S. and 11.2 percent in the euro area.

In Asia, the MSCI Asia Pacific (MXAP) Index was little changed at 118.13 at 1:36 p.m. in Tokyo, after earlier this week touching a three-week high of 118.82.

Later today in Europe, the Bank of England and the European Central Bank are forecast to keep rates unchanged at meetings, separate surveys by Bloomberg News showed. The BOE will refrain from changing its asset purchase target from £375 billion, according to the median estimate of a survey of economists.

A producer-price index in the euro area probably fell 0.4 percent in June from a month earlier, a survey of economists showed before a report scheduled to be released today. That would compare with a 0.5 percent decline the previous month.
Unemployment Benefits

In the U.S., first-time claims for unemployment benefits are expected to rise to 370,000 in the week ended July 28, according to the median estimate of 46 economists polled.

In Australia, which has avoided a recession since 1991, the mining boom driven largely by surging Chinese steel production helped it ride out the 2008 financial crisis. Still, the retail industry weakened last year, reflecting seven rate increases in 13 months to contain inflation, as well as growing concerns about the global economy.

“The apparent strength of export volumes in the quarter suggest they are unlikely to detract as much as we thought from gross domestic product and the retail numbers suggest consumption was even firmer than our forecast,” RBC’s Turner said. “It looks like growth was tracking slightly above trend in the quarter.”