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Retail sales higher than expected – Is the economy turning?

According to the Australia Bureau of Statistics data released today, retail sales rose in May by 0.5%, beating analyst expectations of a 0.2% rise. Retail spending was $21.3 billion for May 2012, compared to $21.2 billion in April. We’ve now had five consecutive months of rising retail sales, the longest period since September 2010.

Households around Australia have been receiving carbon tax assistance packages since mid-May, and now it looks like we know what those funds have been used for.

Record car sales too

In a report in today’s Australian Financial Review, June was a record month for new car sales, with more than 110,000 vehicles sold for the first time ever, thanks to end of financial year sales. SUV (4WDs) sales are up 33% compared to last year – which should be excellent news for 4WD accessories manufacturer ARB Corporation Limited (ASX: ARP).

Together with increasing retail sales, building approvals and rising house prices, growth in Australia looks like it has picked up. It’s another reason for the RBA to keep interest rates on hold for the foreseeable future — not that I’m predicting anything!

The Australian dollar also lifted on the news to a new two-month high of 103.3 US cents.

Some commentators have been forecasting doom and gloom for our economy, with no-end in sight. That’s easy enough to do, looking at the last few months, or even a year or two, and extrapolating that view far into the future.

Markets go through cycles, both down and up — this market looks like it’s recovering, and proving those commentators wrong.

Today’s retail winners

Most discretionary retailers have seen their share prices rise today, with Noni-B Limited (ASX: NBL) the best performer, up over 5.3% to 70 cents, just before market close.

Speciality Fashion Group Limited (ASX: SFH) was up 2% to 52 cents, with Myer Holdings Limited (ASX: MYR) rising 2.4% and David Jones Limited (ASX: DJS) up 2.2%.

Premier Investments Limited (ASX: PMV) is currently flat.

Foolish takeaway

Housing and retail are two of the sectors (along with the media sector) that were showing the most signs of weakness. For these two sectors to pick up is a good sign for Australia’s economy.

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Motley Fool writer/analyst Mike King doesn’t own shares in any company mentioned.  The Motley Fool ‘s purpose is to help the world invest, better.  Take Stock  is The Motley Fool’s  free  investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  Click here now  to request  your free subscription , whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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