Sydney: Retail sales in Australia saw a big increase in November, recording their highest increase in ten months. Black Friday discounts helped attract shoppers looking to save money. However, the increase was less than expected, suggesting that the rise is not a hindrance to interest rate cuts.
Analysts expect the increased demand to be a result of the Christmas shopping rush. Markets are closely watching the possibility of the Reserve Bank of Australia taking steps to ease monetary policy in February.
In data released by the Australian Bureau of Statistics, it was shown that retail sales rose by 0.8% on a seasonally adjusted basis, after rising by 0.5% in October, while sales were expected to grow by 1.0% in November. Following the release of the data, the Australian dollar fell by 0.2% to reach 0.6204 US dollars.
So when comparing November sales of this year with the same month last year, an increase of 3.0% was recorded, bringing total sales to 37.1 billion Australian dollars (about 23 billion US dollars). The Australian Bureau of Statistics added that the promotions extended throughout November, not just to the Black Friday weekend.
Sales at department stores also increased by 1.8% during the month, while spending at cafes and restaurants increased by 1.5%.
Ben Oddy, chief economist at Oxford Economics Australia, said the popularity of Black Friday sales in Australia made the seasonal adjustments made to the data inaccurate. This, in turn, made it difficult to gauge the true strength of consumption from the data. He added that the increase in sales is likely to be countered by a contraction in sales in December.
Quarterly inflation averages 0.5% in Q4
In fact, December sales last year fell sharply after a strong rise in November. Some of the factors that may have helped the outlook improve include slowing inflation and income tax cuts. However, consumer spending has so far been below expectations, prompting the Reserve Bank of Australia to make an unexpected decision to shift monetary policy to an accommodative stance last month.
The Reserve Bank of Australia has kept interest rates on hold for more than a year. Although the cash rate has reached 4.35%, above the lows of 0.1% recorded during the Covid-19 pandemic, the bank sees this level of interest as sufficient to control inflation while supporting the labor market.
Meanwhile, the decline in core inflation recorded on Wednesday has increased bets on a rate cut in February. According to swaps, there is a 60% chance of a rate cut this month. Futures are pointing to a higher probability of 78%.
The Commonwealth Bank of Australia expects quarterly inflation to average 0.5% in the fourth quarter. Nomura, meanwhile, has cut its forecast to 0.4%, well below the Reserve Bank of Australia’s estimate of 0.7%.
Andrew Tichorst, senior economist at Nomura, said the probability of a rate cut has risen from 60% to at least 70%. He added that the rise in unemployment in December would boost that probability further. The Reserve Bank of Australia is due to release its December retail sales report soon, along with updates on the tight labor market, which will help determine the bank’s next steps on February 18.
Monthly and quarterly estimates of retail sales and volumes, including in-store and online sales.
Analysis by Industry
Retail food retail sales increased 0.5% ($76.6 million) in November, seasonally adjusted.
By industry subgroup, seasonally adjusted estimate:
- Supermarket and grocery store sales increased 0.6% ($70.4 million).
- Alcoholic beverage retail sales increased 0.7% ($10.0 million).
- Other specialty food retail sales decreased 0.4% ($-3.9 million).
Retail household goods
Retail household goods sales increased 0.6% ($38.5 million) in November, seasonally adjusted.
By industry subgroup, seasonally adjusted estimate:
Furniture, floor coverings, housewares and textiles retail sales revenue increased 2.2% ($34.6 million).
Retail hardware, building and garden supplies retail sales increased 0.3% ($5.9 million).
Retail sales of electrical and electronic goods decreased 0.1% ($-2.1 million).
Apparel, footwear and personal accessories
Sales of apparel, footwear and personal accessories increased 1.6% ($47.0 million) in November, seasonally adjusted.
By industry subgroup, seasonally adjusted estimate:
- Retail sales of apparel increased 1.4% ($29.5 million).
- Retail sales of footwear and other personal accessories increased 1.8% ($17.5 million).
Other retail
Other retail sales increased 0.3% ($16.7 million) in November, seasonally adjusted.
By industry subgroup, seasonally adjusted estimate:
Retail sales of pharmaceuticals, cosmetics and personal care increased 1.0% ($23.0 million).
Newspaper and book sales revenue increased 1.8% ($3.0 million).
Other retail sales of leisure goods decreased by 0.6% ($-3.8 million).
Other retail decreased by 0.2% ($-5.5 million).
Online retail
Total online retail sales were $4,182.6 million in November 2024, seasonally adjusted. Seasonally adjusted online sales increased by 1.2% ($47.6 million), following a 1.1% ($43.1 million) increase in October 2024. Seasonally adjusted sales increased over the year by 8.7% ($333.0 million).