Money matters story
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The hardest hit sector was cafe, restaurant and food retailing, followed by clothing / File
RETAIL sales sunk 1.1 per cent in October, well below economists predictions for a 0.4 per cent gain.
Australian Bureau of Statistics figures reveal retail turnover plunged to $20.23 billion, after a small rise of 0.1 per cent the previous month.
The hardest hit sector was café, restaurant and food retailing, with sales down 4.8 per cent, followed by clothing, footwear and accessories, down 4.6 per cent.
The falloff in shoppers' spending is the biggest monthly drop since July 2009, as the impact of the global financial crisis hit.
The disappointing data triggered an immediate fall in the Australian dollar.
It dived from about US96.63c to below US96.30c.
The figure is certain to give retailers a nasty surprise, as it records sales before the Reserve Bank's latest interest rate rise which economists predicted would further dampen economic activity.
It confirms the sluggishness in the domestic economy - and a poor outlook for Christmas retail sales -a after yesterday's modest GDP growth of just 0.2 per cent for the September quarter.
Leading economists have observed that Australians are saving more and staying at home rather than going to restaurants and lashing out on shopping.
ANZ senior economist Katie Dean said this was “not a good start” heading into the critical Christmas trading season.
“Certainly what it does mean is that it’s potentially going to be a fairly tough Christmas,” she said.
“Households are in a good shape but they’re not really willing to dip into their pockets at this stage to spend big given we did actually get that interest rate rise in November.”
Ms Dean said that employment was quite strong in October but consumers “were obviously quite worried” about the likelihood of higher interest rates.
retailers have predicted that growth this Christmas will be no higher than 3 per cent, which is a poor climb on past Christmas sales affected by the GFC.
CommSec chief economist Craig James said it confirmed the worries of retailers, who had been slashing prices for months in a bid to keep sales moving.
“It’s certainly come as a shock to economists and to investors alike but we do know that the figures can be a little bit volatile from month to month,” said CommSec chief economist Craig James.
“There’s a couple of influences. One is that the stronger Australian dollar is pushing down the price of imported goods so there’s a price effect in there and another price effect would be coming from the fact that retailers are trimming prices, trimming margins in this sort of environment.
“No doubt what retailers have been saying for some time, that conditions are difficult out there, that they’re having to cut prices, that’s clearly evident in the figures today.”
But there was some good news for October.
At the same time, the bureau said the nation's trade position improved in October to a seasonally-adjusted surplus of $2.63 billion in October, compared to an upwardly-revised $1.81 billion in September.
Economists had expected a surplus of $2 billion in October.
Imports fell three per cent, while exports rose one per cent in the month.
- with AAP
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