SYDNEY: Australian retail sales edged up only marginally in August as weakness in household goods and clothing pointed to restraint in discretionary spending, adding to the case for further supportive cuts in interest rates.
The Australian dollar dipped to a one-month trough after government figures showed retail sales rose 0.2 percent in August from July, when they slipped 0.8 percent. That was under forecasts of a 0.4 percent gain and left sales looking very tepid for the quarter.
"There's some real weakness in household goods, apparel, discretionary cafes and restaurants-type expenditure. The softness -- you can see it in a range of indicators," said Su-Lin Ong, a senior economist at RBC Capital Markets.
"We've had a pretty long held view of rates down to 2.75 percent in the first-half of next year. We're sticking to that."
The Reserve Bank of Australia (RBA) cut interest rates by a quarter point to a three-year trough of 3.25 percent on Tuesday as a slowdown in China, falling export prices and a high currency all combined to darken the economic outlook.
Investors are convinced the central bank is not done yet, with interbank futures showing a two-in-three probability on a further move to 3.0 percent next month.
Overnight indexed swaps, which show where the market thinks the cash rate will be over time, put rates down at a record low of 2.67 percent in 12 months.
Such an easing would support household incomes as every quarter point cut in mortgage rates reduces annual repayments on an average A$300,000 home loan by around $564.
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