Judging by today’s retail sales data, Australia’s economic growth is still subdued.
Retail spending rose just 0.1% in July, according to the Australian Bureau of Statistics (ABS), much less than the 0.4% economists had been expecting. This follows a flat June, and a similar rise of 0.1% in May.
Department store sales, including the likes of David Jones (ASX:DJS) and Myer Holdings (ASX:MYR) dropped 1.3%, with other retailing sliding 0.3%. Cafes, restaurants and takeaway food services rose 0.2%, clothing, footwear and personal accessory retailing gained 0.3%, while household goods retailing saw a 0.1% increase in July.
On a month-by-month basis, department stores sales dropped 7.9%, which would be hugely concerning for David Jones and Myer – and their shareholders. But it seems that not all retailers are suffering the same fate.
Harvey Norman (ASX:HVN) reported last week that home appliances, bedding and furniture categories continued to show good growth, with sales from the franchised Australian operations recording a 5.3% increase in sales in July, compared to July 2012. Likewise, JB Hi-Fi Limited (ASX:JBH) saw sales growth of 8% in July 2013, which is fairly impressive given the impact the Olympics in 2012 had on sales.
The weak retail data is unlikely to sway the Reserve Bank to cut rates later today, having cut the official cash rate by 0.25% last month. The central bank will likely be waiting to see more economic data before cutting rates much further, with gross domestic product data to be released on Wednesday, as well as other economic indicators.
The falling Australian dollar was meant to give our retailers a shot in the arm, mainly by persuading consumers to shop locally rather than having to pay more than 10% extra because of the falling exchange rate. That could mean at least one more interest rate cuts is on the cards before Christmas.
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