Gloom in Australia's retail sector deepened in June with sales falling unexpectedly, with the outcome further eroding support for the Australian dollar, which touched its lowest levels since mid-July.
Australian retail sales fell 0.1% to a seasonally adjusted 20.54 billion Australian dollars (US$22 billion) in June from A$20.57 billion in May, the Australian Bureau of Statistics said Wednesday. Economists expected a rise of 0.3% on the month. Sales rose 0.3% in the second quarter from the first in chain volume terms, meeting expectations.
The data add to concerns that Australian shoppers are taking an extended break from spending to repair household balance sheets and build savings. With consumers on the sidelines, the Reserve Bank of Australia is likely to be in less of a hurry to raise interest rates. The central bank left its key interest rate on hold Tuesday at 4.75%, citing concerns about the world economy, but warned it still had concerns that inflation was accelerating.
Credit markets took a different view, building in an expectation that interest rates will be cut by an average of 0.86 percentage points over the next year. The Australian dollar fell to its lowest levels since mid-July after the data. It dropped to US$1.0680, from US$1.0739 just ahead of the data. Late morning in Asia, it was trading at US$1.0696.
Also Wednesday, the agency reported Australia posted a seasonally adjusted trade surplus of A$2.05 billion in June, compared with a surplus of A$2.7 billion in May. Economists expected a surplus of A$2.2 billion. Exports were flat in June, while imports rose 3.0%.
Joshua Williamson, an economist at Citigroup, expects consumers to remain cautious for some time, even as employment levels remain very strong across the economy. The soft environment implies the outlook for retailers will be weak. "We have a structural adjustment in consumer psychology at the moment," he said.
The data come amid cries from retailers that demand has dropped sharply, forcing profit expectation downgrades and extended sales. Talk of higher interest rates, a drawn-out debate over a proposed carbon tax and fears linked to global financial market instability are behind the conservative trends, economists said.