By Stella Qiu and Wayne Cole
SYDNEY (Reuters) – Australian retail sales posted their biggest increase in 10 months in November as Black Friday discounts attracted cost-conscious shoppers, but growth missed forecasts that suggested the increase was no barrier to rate cuts.
Analysts suspect the extra demand is merely a carryover from Christmas, and markets are still betting the Reserve Bank of Australia could ease policy in February.
Retail sales rose 0.8% on a seasonally adjusted basis, after rising 0.5% in October, Australian Bureau of Statistics (ABS) data showed on Thursday. Growth of 1.0% was expected in November.
The Australian dollar slipped 0.2% to $0.6204 on the data.
Sales rose 3.0% compared to last year to A$37.1 billion ($23 billion), with the ABS noting that promotional activity now spans the entire month of November, not just the Black Friday weekend.
Sales in department stores jumped 1.8% in the month, while consumption in cafes and restaurants rose 1.5%.
“The continued rise in popularity of Black Friday sales in Australia means that seasonal strength could not be effectively captured by the seasonal adjustment of the ABS,” said Ben Udy, lead economist for Oxford Economics Australia.
“This makes it extremely difficult to get a reading of the underlying strength of spending from these data, as the solid increase is likely to be offset by a decline in sales in December.”
Indeed, sales for December of the previous year fell back after a jump in November.
The outlook for sales has been helped somewhat by slowing inflation and large income tax cuts. However, the uptick in consumer spending so far has been disappointing and was the reason why the central bank unexpectedly fell last month.
The RBA has held interest rates steady for more than a year, judging the cash rate of 4.35%, up from a record low of 0.1% during the pandemic, to be restrictive enough to bring inflation to its target range while preserving employment growth .
A drop in core inflation on Wednesday led markets to increase bets on a rate cut in February. Swaps imply a 60% chance of such a move, while futures indicate a 78% probability.
The Commonwealth Bank of Australia (OTC: ) now forecasts a shortened median measure of inflation in the fourth quarter to be 0.5% at the three-month rate, while Nomura cut its forecast to 0.4%, well below the RBA’s own estimate of 0.7 %.
“We previously assigned a ~60% probability to the first RBA easing of 25bp in February and we think that is now likely to have risen to at least 70%,” said Andrew Ticehurst, senior economist at Nomura.
“A rise in the unemployment rate in December – our base case – would further strengthen our confidence.”
The RBA will have its December retail sales report as well as news on a surprisingly tight labor market before deciding on its next move on February 18.
