Australia’s retail sales is solid, yet the economic transition has been stalled.
Great news with the release of October retail sales data which showed the seasonally adjusted estimate rose 0.4% for the month, following an upwardly revised 1.3% in September (from the 1.2% reported previously) and a rise of 0.1% in August 2014.
Many specialists had hoped that this could be the good news for the economy transition needs in the run up to Christmas and a signal that while Australian consumers are far from vivacious. They are at least going to spend some of the money they have been hoarding over the past 8 months in the run up to Christmas.
The latest data shows that the 3 and 12 month rates of growth have stabilised. Still, while the data is quite solid, the break up suggests that the economic transition is still stuck in housing.
The household good sales are literally through the roof. Yet one of the key voluntary items of retail sales: cafes and takeaways, garnered 2.1% after rising the same amount last month. This combination gives us one message for economic growth and one for retailers in the run up to Christmas.
For the economy as a whole this data is great news but for retailers, it says Australian consumers are still cautious so getting your value proposition right is key in the current economy if you want the best chance of success.
In the end, at least if people are spending their money, then you will have a chance. The implications for monetary policy in this is that it highlights the RBA’s views that the wealth impact together with dwelling construction is keeping the economy ticking over.