Australian Retail Sales Dip in December, But Discounting Boosts Fourth Quarter Growth
By Wayne Cole
SYDNEY (Reuters) – Australian retail sales saw a slight decrease in December, following a surge in spending during Black Friday the month before. However, discounting efforts helped shoppers make a much-needed contribution to economic growth in the fourth quarter.
Data released by the Australian Bureau of Statistics (ABS) on Monday revealed that retail sales fell by 0.1% in December compared to November, when they had increased by 0.7%. While analysts had predicted a larger 0.7% drop, the outcome was stronger than expected due to the timing of Cyber Monday promotions and widespread discounting throughout the month.
Robert Ewing, head of business statistics at the ABS, noted that Cyber Monday drove increased spending on household goods as consumers took advantage of discounts on big-ticket items. Overall, fourth-quarter sales rose by a real 1.0% to A$105.8 billion ($64.93 billion), surpassing forecasts of a 0.8% gain and marking the largest increase since early 2022.
Discounting played a significant role in driving up sales volumes, with households utilizing tax cuts and government subsidies distributed in the latter half of the year. This spending is expected to contribute around 0.2 percentage points to gross domestic product, providing a crucial boost to an economy that had been struggling under high mortgage rates and cost-of-living pressures.
With the Reserve Bank of Australia anticipated to announce its first rate cut in four years at its upcoming meeting on Feb. 18, markets are pricing in a 95% probability of a 25 basis points reduction in the 4.35% cash rate. The central bank had hinted at the possibility of a rate cut in December, and recent soft inflation data has reinforced expectations for an imminent move.
Luci Ellis, chief economist at Westpac, highlighted the accelerated disinflation and projected further rate cuts in May, August, and November, potentially bringing the terminal rate down to 3.35%. The global trade landscape, particularly the impact of President Donald Trump’s tariffs on China, Mexico, and Canada, further supports the case for easing monetary policy.
As Australia heavily relies on exports to China, any disruptions in trade could hinder economic growth and dampen demand for commodities. Consequently, the Australian dollar depreciated by 1.6% to its lowest level since the 2020 pandemic at $0.6115.
In conclusion, while retail sales saw a decline in December, the fourth quarter’s strong performance fueled by discounting efforts bodes well for the Australian economy. With the prospect of rate cuts on the horizon and potential challenges in global trade, policymakers and businesses alike will need to navigate these uncertainties to sustain growth and stability.
