Australian retail sales posted a second month of solid growth in September, while spending for the whole third quarter made moderate gains amid subdued price pressures. Official data issued on Wednesday showed that while prices for Australia's key resource exports were weak it was selling a lot more of them. This rebound in export volumes likely means economic growth accelerated last quarter after a worrying slowdown in the second quarter.
"It looks like net exports will make a very handy contribution of around 1 percentage point to GDP growth," said Tom Kennedy, an economist at J.P. Morgan. "So GDP growth is looking OK for a rebound in the quarter." That would be a welcome development for policymakers, especially since the second-quarter's meagre 0.2 percent rise in gross domestic product (GDP) had prompted much media talk of recession. The Reserve Bank of Australia (RBA) cited economic "green shoots" when keeping interest rates steady at 2 percent at its November policy meeting this week.
That optimism led investors to scale back the chance of a policy easing in December, though the central bank did note that subdued inflation allowed room for a move if needed. Interbank futures imply a around a 32 percent probability of a cut next month, but that rises to over 80 percent in February. (The RBA does not meet in January.)
Wednesday's data from the Australian Bureau of Statistics showed retail sales rose 0.4 percent in September, from August when they increased by a matching amount. Sales for the third quarter rose by 0.6 percent when adjusted for inflation, which remained subdued across most retail sectors.
The retail industry accounts for A$290 billion of Australia's A$1.6 trillion ($1.22 trillion) of annual economic output, and is the second biggest employer with 1.25 million workers. Other data showed the trade deficit narrowed more than expected to A$2.3 billion in September, thanks to exports rising 3 percent. Exports to China were up almost 14 percent on September last year even though prices for key commodities such as iron ore were weaker, a testament to the ability of Australia's low-cost producers to grab market share.
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