SYDNEY: Australian retail sales grew at a snail's pace in February as consumers spent less on clothing, household goods and eating out, a long-running trend that will only add to industry calls for another cut in interest rates.
The Reserve Bank of Australia (RBA) holds its April policy meeting on Tuesday and while economists doubt it will cut the 4.25 percent cash rate this time, many do expect an easing to 4.0 percent come May.
"The figures show sales are just dribbling along, as they have been for six months now, so there's no big surprise there," said Brian Redican, a senior economist at Macquarie.
"Going by the RBA's public statements, they don't see any urgency to ease right now, but we do see a greater probability of a move in May after the inflation numbers are out."
Key data on inflation for the first quarter are due on April 24 and are generally expected to show price pressures remain well contained, offering scope for an easing in early May.
The market seems to agree, with interbank futures implying only a 30 percent probability of an easing this week, but rising to almost 100 percent by May.
Such a move would be a relief for the Labor government which is slumping in the polls but still set to deliver a tough budget on May 8, a week after the central bank's May policy meeting.
Indeed, the aggressive fiscal tightening needed to get the budget back into surplus in 2012/13 as promised is sure to be a drag on economic growth and another argument for easier monetary policy.
While Australia's mining sector is booming on the back of red-hot demand from China and India, a high local dollar has been hurting sectors like manufacturing, tourism and retail.
Tuesday's figures from the government showed retail sales rose a miserly 0.2 percent in February to A$21 billion, short of already modest forecasts for a 0.3 percent increase.
Sales values were up 2.6 percent on February last year, a long way from the growth pulse of 5 to 6 percent retailers enjoyed for much of the last decade.
SPENDING HABITS CHANGE
The A$240 billion retail sector still accounts for 18 percent of Australia's GDP and is the second-biggest employer after the health industry, with 10.6 percent of all jobs.
But it is less important than it once was and the RBA estimates the retail data now covers only around a third of total consumption, down from 40 percent in the 1980s.
Instead Australians have been spending more on services, from education to health care, while taking advantage of a strong currency to go abroad in record numbers.
There has also been a big shift to internet shopping, which is not entirely covered by the retail sales data. Figures from National Australia Bank show online sales picked up smartly in February thanks in part to a splurge of gift buying for Valentine's Day.
The bank's index of online sales rose 5.8 percent in February to 168.1, putting it 26.4 percent above the same month last year. In all, online sales were valued at A$10.9 billion ($11.3 billion) for the year to February.
That equals around 5 percent of overall retail spending and is growing far faster than sales in traditional bricks and mortar stores. But many major Australian retailers have been slow to embrace online merchandising, in part for fear of cannibalising store sales.
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