Australia retail sales bounce, economy seen loping along

A shopper looks at clothes on sale at a retail store located in a shopping mall in central Sydney, Australia
A shopper looks at clothes on sale at a retail store located in a shopping mall in central Sydney, Australia, March 19, 2017. REUTERS/Steven Saphore

December 5, 2017

By Swati Pandey and Wayne Cole

SYDNEY (Reuters) – Australian retail sales bounced in October after months of lukewarm demand, a bright sign for spending in the upcoming holiday season as Amazon.com Inc <AMZN.O> opened its doors for business Down Under.

The retail behemoth started taking online orders on Tuesday, ending breathless speculation about its arrival in the world’s twelfth biggest economy.

Tuesday’s data from the Australian Bureau of Statistics (ABS) showed retail sales rose 0.5 percent in October from the previous month, the strongest since May and above expectations for a 0.3 percent increase. September sales had only inched up by a revised 0.1 percent.

Sales were up across every sector with clothing and eating out particularly strong.

Australia’s A$26 billion ($19.8 billion) brick-and-mortar retailers have been struggling amid cutthroat competition and as relentless price discounts fail to entice customers facing paltry wage growth and mountains of debt.

There are fears Amazon’s entry could further stifle traditional retailers and suppress prices and inflation.

Oddly, the ABS does not yet include online data in its headline retail series even though they account for more than 7 percent of total sales.

That means Amazon will not feature in the monthly figures, though internet sales are easily the fastest growing segment of the market.

The ABS does have an experimental estimate of online retail turnover and that jumped 11.3 percent in October to almost match last year’s Christmas sales in dollar terms.

The Australian Retailers Association (ARA) expects Amazon to inject new life into the country’s sluggish retail sector, helping local chains expand their customer base.

“With the advancement in digital technologies across the retail sector, we believe online retail sales will account for 13 percent of total retail sales in the next five years,” said ARA’s executive director Russell Zimmerman.

GDP AHEAD

Figures for gross domestic product (GDP) due on Wednesday are forecast to show Australia’s economy expanded by a solid 0.7 percent in the third quarter, from the previous quarter.

That would see annual growth accelerate smartly to 3 percent, with a rare contraction from the third quarter of last year falling out of the calculation.

The pick up is a major reason the Reserve Bank of Australia (RBA) is considered certain to hold interest rates at 1.5 percent at its last policy meeting of the year on Tuesday.

A Reuters poll of 42 analysts found all but one expected a steady outcome this week, and 28 saw no hike until at least September next year. [AU/INT]

Doing its part to promote growth was the public sector as it spent big on infrastructure. Analysts estimated government spending on investment rose over 5 percent in the third quarter, while consumption spending edged up 0.2 percent.

That impulse to growth should have helped offset a slightly disappointing trade performance, with net exports adding nothing to GDP when analysts had looked for a contribution of around 0.25 percent.

Strength in resource and service exports still helped the country run a trade surplus of A$3.1 billion last quarter, while the current account deficit narrowed slightly to A$9.1 billion.

(Reporting by Swati Pandey; Editing by Kim Coghill)