SYDNEY (Reuters) – Australian retail sales rose by more than expected in October as tax cuts flowed through to wage packets and consumers became more confident that interest rates would not increase again, although monetary easing still looked distant.
Data from the Australian Bureau of Statistics (ABS) on Monday showed retail sales firmed 0.6% in October from September, when they rose a meagre 0.1%. Analysts had looked for a gain of 0.4% in October.
Sales were up 3.4% on a year earlier at A$36.7 billion ($23.9 billion), with the ABS noting some retailers had taken to discounting early ahead of the November Black Friday events.
“After a steady result last month retailers told us that sales activity grew in October ahead of the Black Friday sales,” said Robert Ewing, head of business statistics at the ABS.
“The rise in discretionary spending was driven by online discounting events while people also spent more on electrical goods, particularly televisions and other audio-visual equipment.”
The outlook for sales has been helped in part by a slowdown in inflation and the large cuts to income taxes. Consumer sentiment jumped for a second straight month in November and reached a 2-1/2-year high.
The Reserve Bank of Australia (RBA) had expected household spending to rebound this year given the billions in tax cuts delivered from July. It has kept interest rates at 4.35% for an entire year now.
Markets imply almost no chance of a cut in the 4.35% cash rate at the RBA’s next meeting on Dec. 10, and only a 24% chance of a move in February.
A rate cut is not fully priced in until May next year, in part due to the remarkable resilience of Australia’s labour market.
($1 = 1.5387 Australian dollars)