Retail spending flat, fall in job ads, company profits point to rate cut
- From: The Australian
- December 03, 2011
The Reserve Bank of Australia is widely expected to cut the official cash rate to 3 per cent tomorrow to help boost economic activity in the non-mining parts of the economy as the resource boom begins to peter out.
Australian household spending on food, the biggest component of retail trade, rose almost 1 per cent to $8.9 billion in October, but spending on discretionary items slumped. Spending on footwear, furniture and building and garden supplies each dipped around 2 per cent over the month, in seasonally adjusted terms. Spending at restaurants and cafes fell 1 per cent.
“The steady retail numbers give the RBA more motivation to cut interest rates tomorrow to provide a bit of support ahead of Christmas,” he said.
CommSec economist Savanth Sebastian agreed that weak retail numbers could push the central bank to consider a rate cut.
"All the data today really paves the way for the Reserve Bank to cut rates,'' he said. "There seems to be a lack of strength in retail - consumers remain conservative, and if anything, trading conditions continue to remain tough despite previous rate cuts.''
Meanwhile, total company profits dipped almost 3 per cent to $61.7 billion, dragged down mainly by mining companies, whose profits fell more than 12 per cent over the quarter as a result of falls in key commodity prices.
Mr Bloxham said those figures suggested national accounts figures released by the ABS on Wednesday would show a modest increase in gross domestic product (DGP) over the September quarter.
“This suggests that GDP when we see it on Wednesday is probably going to be a positive but modest number so there is little really standing in the way of the RBA (cutting the cash rate).”
The Reserve Bank surprised financial markets last month when it kept interest rates on hold, citing concerns about inflation.
Other data released today would tend to allay those concerns, helping pave the way for another rate cut. House prices rose only slightly in most capital cities over the month to November. A 1 percent drop in prices in Melbourne kept a key national house prices index at a standstill, according to RP Data’s monthly index.
A separate inflation survey showed consumer prices fell very slightly in November by 0.1 per cent, although they remain 2.5 per cent above their level the same time last year.