Retail sales figures have been lacklustre for the past couple of years but in 2018 the annual growth rate showed some signs of stabilising, albeit at a low rate. While recent months’ figures have been generally in line with or above market expectations, the latest month’s figures have come as a negative surprise.
According to the latest ABS figures, total retail sales fell by 0.4% over December on a seasonally-adjusted basis, below the expected flat result and a marked drop from November’s revised figure of +0.5%. On an annual basis, retail sales increased by 2.8%, the same as November’s comparable figure.
Westpac senior economist Matthew Hassan said, “Overall, this was a weak update, slightly weaker than we had been anticipating and highlighting downside risks to the December quarter GDP.”
Despite the report’s “miss”, reactions in local financial markets was unremarkable. By the end of the day, the yield on 3-year and 20-year ACGBs had both crept up 1bp to 1.75% and 2.61% respectively while 10-year yields had gained 2bps to 2.25%.
In the forex market, the Aussie dollar dropped by around 0.15 US cents immediately upon the release of the report and then slowly recovered back to 72.10 US cents. It jumped by around 0.5 US cents after the RBA meeting to finish the afternoon session at close to 72.65 US cents.
In terms of local monetary policy, prices of cash futures contracts were largely unchanged from the previous day. May contracts implied a 12% chance of a rate cut, August contracts implied a 28% chance and November contracts implied a 48% chance.