| SYDNEY, March 6
SYDNEY, March 6 Australian retail sales
rebounded in January after two months of tepid outcomes,
although the underlying pulse was one of sluggish household
consumption as record-low wages growth eats into spending power.
Data from the Australian Bureau of Statistics out on Monday
showed retail sales rose 0.4 percent in January, in line with
market forecasts and up from a 0.1 percent fall in December.
The bounce back will provide some comfort to the Reserve
Bank of Australia (RBA) given it was a pick up in household
consumption that helped the economy dodge a recession in the
fourth quarter of last year.
Australia's A$1.6 trillion economic output climbed 1.1
percent in the fourth quarter, handily outpacing forecasts.
Yet with wages growth so anaemic, consumers only managed to
spend more by saving at a slower pace, a trend that can only
last so long.
RBA Governor Philip Lowe has also warned that high levels
of household debt could curtail spending should consumers decide
they have to put more aside to pay off that borrowing.
"It is still early days, but even if growth in retail sales
were to remain at 0.4 percent in February and March, it appears
that real consumption growth would still struggle to match the
fourth quarter's 0.9 percent q/q rise," said Kate Hickie,
economist at Capital Economics.
Monday's data showed sales of clothing, footwear and
personal accessories dipped 0.4 percent, likely in part due to
falling prices amid intense competition, while department stores
suffered a 0.5 percent fall.
"The industry data are oscillating around a soft monthly
trend," said Citi economist Josh Williamson.
That matters as the retail sector has annual sales of A$290
billion ($220 billion) and is the country's second-biggest
employer with 1.25 million workers.
"The other reason why we view retail sales growth as weak is
because of the ongoing discounting cycle and competitive
pressure from new entrants that is keeping price growth well
contained. This in turn is helping to keep overall inflation
pressures mild," Williamson said.
Core inflation is already at a record low of 1.5 percent and
looks like staying under the RBA's target band of 2-3 percent
for another year or more.
While such softness might argue for a further cut in
interest rates, the central bank is concerned an easing would
only fuel more borrowing for speculation in housing and,
ultimately, a damaging bust in the market.
(Reporting by Swati Pandey)