November 4, 2019 / 1:16 AM / 3 months ago

Australian weak retail sales, jobs point to need for more stimulus

SYDNEY (Reuters) - Australian retail sales surprisingly fell last quarter while growth in September was weaker-than-expected, underlining the need for even more stimulus to jumpstart the slowing economy.

FILE PHOTO: A woman carries her shopping bag containing purchased goods as she stands with other commuters at a bus stop in central Sydney, Australia, June 16, 2017. REUTERS/Steven Saphore

Retail sales inched up 0.2% in September after a respectable 0.4% gain in August, figures from the Australian Bureau of Statistics (ABS) showed on Monday. Analysts polled by Reuters had expected an increase of 0.5%.

Quarterly data showed sales slipped 0.1% in inflation-adjusted terms in the three months to September following an already sedate June quarter. Analysts were looking for a 0.2% rise.

Retail volumes have now recorded falls in three of the past four quarters to be down 0.2% from a year ago. The last time annual volumes were this weak was in the early 1990s recession. 

In another worrying sign for the economy, separate data on Monday showed Australian job advertisements in newspapers and on the internet fell 1% in October to the lowest level in more than 2-1/2 years.

The gloomy figures knocked the Australian dollar AUD=D3 off a near three-month peak to $0.6904.

“The fall in real retail sales in the third quarter underlines that the RBA still has more work to do,” said Marcel Thieliant, Singapore-based senior economist at Capital Economists.

The Reserve Bank of Australia (RBA) last month chopped its benchmark rate for a third time this year to a record low 0.75% in a bid to revive employment growth, consumer spending and inflation.

GDP growth would continue to fall short of potential next year and the RBA “will have to cut interest rates by more than most anticipate”, he added.

Australia’s annual gross domestic product (GDP) growth has weakened to the slowest in a decade and indicators so far suggest the lacklustre momentum could continue for a while. Third-quarter GDP data is due next month.

Investors are looking ahead to the RBA’s monthly policy meeting due at 0330 GMT on Tuesday, where it is likely to stay on the sidelines as it awaits the impact of its stimulus so far.

Financial futures <0#YIB:> are pricing in a 60% chance of a cut to 0.5% early next year, with some economists speculating the need for unconventional policy measures or quantitative easing (QE) such as bond purchases or discounted lending to banks.

“We expect the RBA to embark on some form of QE. This could come as early as February 2020,” Citi economist Josh Williamson wrote to clients last week.

“With bank pass-through of conventional policy to lending rates becoming constrained, our forecast for the next cash rate move in February 2020 implies that this date is the first opportunity for the RBA to announce a QE programme.”

Reporting by Swati Pandey; Editing by Stephen Coates

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