Buying S&P/ASX 200 Index (ASX: XJO) shares and pining for that first interest rate cut from the Reserve Bank of Australia (RBA) in 2025?
You're not alone!
As you're likely aware, at its December meeting, the RBA opted to keep Australia's official interest rate on hold at the more than 10-year high of 4.35%.
While inflation has been trending lower Down Under, underlying inflation, which takes out certain volatile items, remains above the central bank's 2% to 3% target range.
Among the concerns the board cited following its last meeting was the outlook for consumer spending, a core economic growth driver with the potential to stymie the RBA's inflation battle.
With that in mind, here's what ASX 200 investors just learned about Australia's retail sales.
ASX 200 dips, then recovers on retail data
The ASX 200 is down 0.45% at the time of writing. The benchmark index has recovered some ground from its dip following the Australian Bureau of Statistics' November retail data release today as investors appear to rethink the implications of an RBA interest rate cut.
The ABS reported that Australian retail turnover rose 0.8% in November, trailing expectations of a 1.0% gain.
November's 0.8% retail turnover boost follows growth of 0.5% in October and 0.4% in September.
Commenting on the November sales data, Robert Ewing, ABS head of business statistics, said:
Black Friday sales events proved once again to be a big hit, with widespread discounting and higher spending across all retail industries.
The popularity of Black Friday sales continues to grow with promotional activity now stretching across the entire month of November, not just solely focused on the Black Friday weekend.
What does this mean for the RBA and interest rates?
So, what does this mean for ASX 200 investors waiting for that first RBA interest rate cut?
Capital Economics economist Abhijit Surya noted that resilient consumer spending could continue in 2025, which might see the RBA push back any rate cuts.
According to Surya (quoted by The Australian Financial Review):
The big picture is that there appears to have been decent momentum behind consumer spending heading into 2025. And with households' real disposable incomes set to keep rising over the coming year, we think there's scope for sustained gains in private consumption.
My Bui, an economist at AMP Ltd, doesn't expect that November's retail data will have a big impact on the RBA's upcoming rate decision.
"The retail outlook is not completely out of the woods yet. Keep in mind that these improvements were from a very low base," Bui said (quoted by Bloomberg). "Overall, we take today's data as relatively neutral in terms of implications for the RBA."
Carol Kong, an economist and currency strategist at Commonwealth Bank of Australia (ASX: CBA), had a more optimistic take on the outlook for an RBA interest rate cut following the latest retail data.
"The weaker-than-expected retail trade figure, combined with yesterday's soft underlying inflation, reinforces our view for a February RBA rate cut," Kong said.
