Just two days after the RBA kept the interest rates unchanged at 0.75 per cent considering the strength of the Australian economy, the recently released retail sales and trade surplus data is providing a volatile outlook for 2020.
The ABS has recently reported a fall in the nationâs trade surplus to $5.223 billion and a drop in retail turnover by 0.5 per cent in December 2019. Though the data turned out to be discouraging, it was broadly in line with the market expectations.
The existing situation of the Australian economy validates that the risks to the RBAâs growth projections remain skewed to the downside. The RBA expects the Australian economy to witness a growth of 2.75 per cent and 3 per cent over 2020 and 2021, respectively.
Black Friday Sales Dragged December 2019 Retail Turnover
After recording a surge of 0.9 per cent in retail turnover in November 2019, Australiaâs retail turnover fell by 0.5 per cent in December 2019 in seasonally adjusted terms.
The fall in retail turnover was stimulated by the increasingly popular Black Friday and Cyber Monday sales events which preponed December shopping in November, and bushfires that ravaged across the nation in the last few months.
According to the Director of Quarterly Economy Wide Surveys, Ben James, the fall in December retail sales followed a strong November. He added that the December retail sales were affected by the consequences of wildfires and related smoke haze evident in New South Wales, negatively impacting restaurants and takeaway food services, food retailing and cafes.
As per the ABS, the retail turnover fell across most of industries, including department stores (2.8 per centâ), footwear and personal accessory retailing (1.5 per centâ), cafes, restaurants and takeaway food services (0.9 per centâ), household goods retailing (0.3 per centâ) and food retailing (0.3 per centâ). The falls in these segments were partially offset by a rise in other retailing, which rose by 0.2 per cent.
State-wise data indicated that retail turnover slipped in South Australia (1.3 per centâ), New South Wales (1.2 per centâ), Queensland (0.5 per centâ), the Australian Capital Territory (0.1 per centâ) and the Northern Territory (0.4 per centâ).
However, there was no change in Western Australia (0.0 per cent) and Victoria (0.0 per cent). A significant rise of 1.1 per cent was seen in Tasmania in seasonally adjusted terms.
Below table shows the state-wise comparison between December 2019 and November 2019 retail turnover figures:
On one hand, the retail turnover fell in seasonally adjusted terms, while on the other hand, it rose by 0.3 per cent in trend terms in December 2019.
It is worth pointing out that the retail turnover increased by 0.5 per cent in seasonally adjusted terms in December 2019 quarter, following a fall of 0.1 per cent in the September 2019 quarter.
Market experts are of the opinion that it is difficult to draw too many conclusions from the retail sales results of December 2019 as there were many factors at work during that period. However, experts continue to expect the retail sector to bounce back strongly in 2020, even though the full impact of coronavirus outbreak is yet to be seen.
Australiaâs well-known retailer, Coles Group Limited (ASX:COL) has recently reported an improvement in its first-half sales (1 July 2019 to 5 January 2020) amid the success of the Christmas campaign. The retailer has pegged its first-half EBIT between $710 million and $730 million, well above the consensus forecasts of EBIT between $658 million and $689 million.
Trade Surplus Narrowed to $5.223 billion in December 2019
In addition to the retail sales data, the trade surplus data announced by the ABS for December 2019 was also quite disappointing.
Australia observed a trade surplus of $5,223 million in December 2019, with a fall of $295 million relative to November 2019 in seasonally adjusted terms.
The fall in the trade surplus was driven by a rise of 2 per cent or $853 million in goods and services debits (imports) to $36,070 million in seasonally adjusted terms and a smaller increase of 1 per cent or $557 million in goods and services credits (exports) to $41,293 million in December.
To recall, the nation saw a seasonally adjusted trade surplus of $5,800 million in November 2019, which was $1,725 million higher than the trade surplus in October 2019.
Growth in exports of goods and services was induced by:
Growth in imports of goods and services was stimulated by:
Amidst the current economic scenario, the market experts are suggesting that the central bank may not make any further rate cut this year, keeping it on hold at 0.75 per cent.
The anticipations are in line with the RBAâs Governor latest indication that additional monetary policy easing would be considered only if there was no further progress being made towards the inflation target and the unemployment rate.
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