-Stephen Walters, JP Morgan economist
Australia's retail sales rebounded in May after a soft performance in April, but remained weaker than economists had expected, according to the Australian Bureau of Statistics. Retail spending increased 0.3% in the reported month, following the 0.1% drop in April and coming in against the median forecast for a 0.5% increase. Clothing, footwear and accessories retailing was strong during the month, rising 0.8%, while food retailing and household goods also increased. However, spending on cafés, restaurants and takeaway, and department stores stalled during the month. The monthly data would also be disappointing news for the Reserve Bank of Australia, after it cut the official cash rate to the lowest level on record of 2% early in May, in an attempt to boost consumer spending. The central bank holds its July policy meeting next week and is expected to keep monetary policy unchanged as its assesses the effect of its moves in May and February. However, annual growth of retail sales accelerated to 4.7% from 4.1% in April.
The Australian economy is seen to continue its listless growth over the course of the new financial year. Yet, there are some bright spots in the economy including the booming housing construction sector, which was benefiting from the RBA's record low interest rates.
© Dukascopy Bank SA