SYDNEY: Australian retail sales were surprisingly strong in July while sales for June were revised higher, suggesting consumption was not nearly as subdued as feared and the next move in interest rates is still upward.
The raft of data issued on Tuesday, Aug 31 also showed Australia's current account deficit shrank to an eight-year low in the second quarter as exports of iron ore and coal boomed, underpinning expectations that the economy grew by a brisk 1 percent in the quarter. The Australian dollar blipped higher after the government reported retail sales rose 0.7 percent in July, above the 0.4 percent forecast and the biggest gain since March.
"The data is obviously stronger than expected and it does start off the third quarter on a positive footing," said Annette Beacher, a senior strategist at TD Securities.
"I think we're getting an overdue reality check that consumers are much stronger that the market thinks."
Investors have been fretting that a slowdown in the United States and Japan could spill over into Australia, where a series of rate hikes earlier in the year had hit demand and housing.
As a result, the market has priced in a real chance that the Reserve Bank of Australia (RBA) would have to cut its 4.5 percent cash rate by year-end, even though the central bank itself has remained resolutely upbeat on the economic outlook.
"The latest sales data is a real positive and supports the RBA's confidence," said Brian Redican, a senior economist at Macquarie. "The economy is clearly travelling well and any talk of a rate cut is nonsense right now."
The stronger-than-expected rise in sales in July followed an upwardly revised 0.4 percent increase in June, which had initially been reported at half that.
EXPORT BOOM
Retail sales account for around 23 percent of Australia's gross domestic product (GDP) and the sector is the second biggest employer after the health industry, with about 11 percent of all jobs.
Second-qaruter GDP figures are due on Wednesday and analysts look for a rise of around 1.0 percent, double the first quarter gain. That would lift growth for the year to 2.9 percent and mark 19 straight years without a recession, a record few others can match.
Australia owes much of its good fortune to the industrialisation of China and India, which is driving strong demand for its resource exports, particularly coal and iron ore.
A resulting boom in export earnings helped shrink the country's current account deficit by 66 percent to A$5.64 billion ($5 billion) in the second quarter, the lowest since early 2002. Export volumes also outstripped imports to add a solid 0.4 percentage points to GDP in the quarter, a little more than analysts had expected.
Also adding to growth was a 1.3 percent rise in real government spending last quarter, which again topped forecasts and could add around 0.3 percentage points to GDP.
Other data out on Tuesday showed approvals to build new homes also beat expectations with a rise of 2.3 percent in July, though all the gains came in the volatile apartment sector. - Reuters
The raft of data issued on Tuesday, Aug 31 also showed Australia's current account deficit shrank to an eight-year low in the second quarter as exports of iron ore and coal boomed, underpinning expectations that the economy grew by a brisk 1 percent in the quarter. The Australian dollar
"The data is obviously stronger than expected and it does start off the third quarter on a positive footing," said Annette Beacher, a senior strategist at TD Securities.
"I think we're getting an overdue reality check that consumers are much stronger that the market thinks."
Investors have been fretting that a slowdown in the United States and Japan could spill over into Australia, where a series of rate hikes earlier in the year had hit demand and housing.
As a result, the market has priced in a real chance that the Reserve Bank of Australia (RBA) would have to cut its 4.5 percent cash rate by year-end, even though the central bank itself has remained resolutely upbeat on the economic outlook.
"The latest sales data is a real positive and supports the RBA's confidence," said Brian Redican, a senior economist at Macquarie. "The economy is clearly travelling well and any talk of a rate cut is nonsense right now."
The stronger-than-expected rise in sales in July followed an upwardly revised 0.4 percent increase in June, which had initially been reported at half that.
EXPORT BOOM
Retail sales account for around 23 percent of Australia's gross domestic product (GDP) and the sector is the second biggest employer after the health industry, with about 11 percent of all jobs.
Second-qaruter GDP figures are due on Wednesday and analysts look for a rise of around 1.0 percent, double the first quarter gain. That would lift growth for the year to 2.9 percent and mark 19 straight years without a recession, a record few others can match.
Australia owes much of its good fortune to the industrialisation of China and India, which is driving strong demand for its resource exports, particularly coal and iron ore.
A resulting boom in export earnings helped shrink the country's current account deficit by 66 percent to A$5.64 billion ($5 billion) in the second quarter, the lowest since early 2002. Export volumes also outstripped imports to add a solid 0.4 percentage points to GDP in the quarter, a little more than analysts had expected.
Also adding to growth was a 1.3 percent rise in real government spending last quarter, which again topped forecasts and could add around 0.3 percentage points to GDP.
Other data out on Tuesday showed approvals to build new homes also beat expectations with a rise of 2.3 percent in July, though all the gains came in the volatile apartment sector. - Reuters
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