SYDNEY, Jan 10 (Reuters) - Australian shoppers tightened their purse strings in November after three months of splurging, but retail sales were still running well ahead of the previous quarter and pointing to a much-needed pick up in consumer spending.
Data from the Australian Bureau of Statistics (ABS) out on Tuesday showed retail sales grew a disappointing 0.2 percent in November from October when they increased 0.5 percent.
However, sales in October and November put together were 1.5 percent faster than the first two months of the previous quarter, bolstering hopes the economy had turned around after contracting in the July-Sept period.
The ABS’s experimental estimate of online retail sales also jumped 10.8 percent in November, enjoying a fourth month of solid gains to top A$1.1 billion for the first time.
“The strong start to the quarter means real consumption growth probably still rebounded in the fourth quarter,” said Kate Hickie, economist at Capital Economics.
She estimates December quarter retail sales growth at 1.3 percent, compared with 0.7 percent in September quarter.
“That would be welcome, given the outright fall in real GDP in the third quarter. It would provide more hope that Australia avoided its first recession in 25 years in the fourth quarter.”
Household consumption accounts for 56 percent of annual economic output, versus the less than 9 percent produced by Australia’s emblematic mining industry.
Figures out last week showed Australia boasted its first trade surplus in almost three years in November as surging commodity prices boosted export earnings, and likely economic growth as well.
Tuesday’s data will provide some relief to the Reserve Bank of Australia (RBA) which has been counting on a pickup in household consumption to offset weakness in mining investment.
The RBA has been playing down the need for further easing following cuts last August and May that took the cash rate to an all-time low of 1.5 percent.
As a result, financial markets had all but given up on the chance of a further rate cut <0#YIB:> and were even toying with the idea of a hike in 2018.
The latest signs show that consumers entered the New Year in a mood to spend. A survey by ANZ and Roy Morgan out on Tuesday showed sentiment surged in the first week of January, with consumers much more upbeat about their finances and eager to buy big-ticket items.
“This is a reasonable indicator of consumer spending, suggesting a solid Christmas and holiday spending period is underway,” said ANZ senior economist Jo Masters.
“It is encouraging that households’ views on future finances are in a strong upward trend, likely supported by a solid labour market and rising house prices.” (Reporting by Swati Pandey; Editing by Eric Meijer)