Australia: Dismal August retail sales report - ING

Rob Carnell, Chief Economist at ING suggests that dismal August retail sales report of Australia has trashd the immediate likelihood of an early rate hike from the RBA.

Key Quotes

“There wasn’t much information in the 0.3%MoM consensus forecast for Australian August retail sales going into this figure. 0.3% is simply the 3-month moving average of what is a horribly volatile series. But it also means than any deviation from that trend suggests that the trend itself is shifting. And that is notable. With a 0.6%MoM contraction in sales in August, it is hard to see this as anything other than a bad figure – volatility notwithstanding. And, moreover, it trashes the immediate likelihood of an early rate hike from the RBA, in contrast to recent comments from former RBA board member, John Edwards.”

“Crunching through the make-up of this bad outcome, aside from department store sales, there is not much good news, with food, household goods and apparel, cafes and restaurants all showing declines on the month. Even the “other” category barely registered an increase. This is not the stuff that inflation increases are made of.”

“Consensus was fairly unhelpful going into the trade figures too. With a forecast range of AUD1,400m, the consensus forecast for AUD850mn surplus was not in this case too far wide of the AUD989 outcome, which derived from a slight increase in exports over the month, against a fairly flattish import figure. This upside miss is insignificant against the volatility and data uncertainty of this series, and by far the more important figure, is the retail sales number which is both AUD negative and should drag down 1Q18 bank bill yields.”