Your 10-second guide to today's Australian retail sales report

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There’s been a bit of economic news in Australia this week. Just a bit.

Well, if you thought the data deluge is over, think again.

Thursday’s another massive day of economic releases. The main highlights will be international trade data, the Ai Group’s Performance of Construction Index (PCI) and January retail sales.

While the first two are important, providing a picture on Australia’s external performance and construction sector in early 2019, this 10-second guide will focus on the retail sales report.

Second only to unemployment data, it’s probably the most important monthly data release in Australia right now.

Given the RBA regards the outlook for household spending as the main domestic uncertainty facing the economy, and following a tepid increase in the December quarter, especially at retailers, this report will naturally attract a lot of interest today.

Here’s the state of play.

  • In December, retail turnover tumbled by 0.4%, missing expectations for an unchanged reading. Excluding food sales, turnover was even weaker, falling by 1%.
  • From a year earlier, sales rose by 2.75%, identical to the pace seen in November. Non-food sales rose by a paltry 1.9% over the same period.
  • In January, a rebound in spending is expected.
  • The median economist forecast looks for an increase in total turnover of 0.3%. Individual forecasts range from a decline of 0.1% to a gain of 0.7%.
  • The wide range of forecasts underlines just how much uncertainty there is about what sales may do month-to-month.
  • The NAB’s cashless retail sales index has had a very good track record for predicting movements in the official retail sales data of late. In January, it points to an increase in the ABS series of 0.3%.
  • The Commonwealth Bank’s business sales indicator also points to a rebound in economy-wide spending in January, including at retailers.
  • In contrast, the NAB’s separate online retail sales index suggests online spending was very weak over the same period.
  • Consumer sentiment, as measured by Westpac, fell to the lowest level since November 2017 at the start of the year. However, it has since improved noticeably, driven entirely by Australians who have a mortgage, likely reflecting the increased chance of lower mortgage rates this year.
  • According to RBA Governor Philip Lowe, as Australia’s labour market tightens, “wages growth will increase further. In turn, this should boost household income and spending and provide a counterweight to the fall in housing prices”.
  • As such, while the unemployment rate will be crucial in determining whether the RBA will cut rates, as a major part of the economy, and a factor that is influential on employment growth, the strength of retail sales will also be highly influential.
  • Outside of the retail report, Australia’s trade surplus is expected to narrow to $3 billion in January, down from $3.68 billion in December.
  • The Ai Group’s PCI doesn’t have a forecast, but given the trends in recent months, it’s unlikely to be good.

The PCI will be released at 8.30am AEDT.

The retail sales and trade data will follow three hours later at 11.30am AEDT.

Business Insider will have analysis on each once they’ve been released.

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