Australia’s October retail sales report will be released later today.
After a weak September quarter for not only retail sales but broader household consumption, this report has taken on increased significance, carrying the potential to reverse or intensify growing pessimism towards the largest part of the Australian economy.
Indeed, the Reserve Bank of Australia (RBA), well known for being optimistic, continues to describe the outlook for household consumption as “one continuing source of uncertainty”.
While it still believes the most likely path for official interest rates is likely to be higher, financial markets aren’t so sure with a growing number of analysts starting to talk about the prospect of the next move in the cash rate being down, not up.
Given no one really knows how the combination of falling home prices, increased financial market volatility and weak household income growth will impact consumer behaviour at a time when labour market conditions are still robust, it means that today’s report is important in terms of guiding monetary policy expectations.
If there’s another soft result today, expect the debate about the direction of the next move to only intensify further.
Here’s the state of play.
- In September, retail sales grew by 0.2%, undershooting expectations for a larger increase of 0.3%.
- From a year earlier, sales rose by 3.7%, the same pace seen in the 12 months to August.
- Excluding food sales, turnover was flat, leaving the increase on 12 months earlier at 3.4%, the fastest increase since June last year. Many deem this figure to be a better indicator on discretionary spending across the country.
- Along with food, sales at cafés, restaurants and takeaway food outlets rose, offsetting a large decline in clothing, footwear and personal accessory turnover. Spending at “other” retailers, on household goods and in department stores was unchanged from August.
- Sales increased in Victoria, Queensland, South Australia and Tasmania over the month, offsetting declines in New South Wales and the Northern Territory. Turnover in the ACT was flat.
- Today, economists expect another soft result.
- Of the 18 surveyed by Thompson Reuters, the median forecast looks for an increase of 0.2%. Individual forecasts range from no change to an increase of 0.4%.
- The NAB’s cashless retail sales index — an alternate measure on retail spending that has a reasonable track record for predicting movements in the ABS series — points to a lift in nominal spending of 0.2%.
- In Australia’s Q3 GDP report, the ABS said that household consumption growth was driven by non-discretionary spending on food and housing, masking a slowdown in discretionary areas.
- That means there’ll be plenty of interest on the breakdown of between food and non-food spending in today’s report.
- Released alongside the retail sales report, the ABS will also release international trade data for October. A trade surplus of $3 billion is expected, similar to that reported in September.
Both will arrive at 11.30am AEDT.
Business Insider will have all of the details once they hit the screens.
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