Retail sales growth remains tepid, thanks to discounting and subdued demand. Photo: Chris HopkinsThe value of retail sales across Australia rose a healthy 0.4 per cent in March, seasonally-adjusted, suggesting consumer demand has started to pick up after a slow start to the year.
The rate compares with a revised 0.1 per cent increase for February and economists’ forecasts of 0.3 per cent.
In volume terms, however, first-quarter retail activity was up 0.5 per cent on the December quarter, down from 0.6 per cent last time and below forecasts of 0.7 per cent.
Nonetheless, an improvement in the March trade balance and robust new home sales in the month point to relatively strong growth in first-quarter gross domestic product, according to some economists.
This, in turn, could spare the Reserve Bank of Australia a follow-up cut to the cash rate, which was reduced to a new record low of 1.75 per cent on Tuesday. Low inflation, which triggered the move, remains a concern, however.
The Australian dollar rose on the upbeat economic snapshot, by about 0.5 per cent to US74.90¢.
The Australian Bureau of Statistics said on Thursday that sales of clothing and footwear climbed 1.1 per cent month-on-month, while food retailing was up 0.6 per cent.
Other retailing, which covers everything from pharmaceuticals and cosmetics to magazines and books, was ahead 0.4 per cent for the month.
Turnover in cafes, restaurants, and takeaway outlets was flat, however, and there was a 0.5 per cent decline in department store sales.
Despite some weakness in the retail data, an 8.9 per cent surge in new home sales in March, and a $900 million narrowing in the trade deficit to $2.2 billion suggests economic growth is gaining momentum, says Capital Economics economist Kate Hickie.
“March’s Australian international trade and retail sales data suggest that a boost to GDP growth from net trade probably more than offset an easing in consumption growth in the first quarter,” she said.
“We estimate that real GDP growth accelerated from the fourth quarter’s 0.6 per cent quarter-on-quarter to about 0.8 per cent.
“Overall, an acceleration in GDP growth in the first quarter would prompt suggestions that the RBA won’t cut interest rates again.
“While demand is important, we still believe that continued low underlying inflation will be the trigger for a decline in rates to 1.5 per cent,” she said.
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