Australians Close Their Wallets as Retail Sales, Imports Tumble
(Bloomberg) -- Australian retail sales suffered the biggest drop in 12 months and imports slumped by the most in almost seven years, raising doubts about the resilience of household spending.
Sales fell 0.4 percent in December, compared with estimates for an unchanged reading, statistics bureau data showed Tuesday. Imports dropped 6 percent in the month, the worst result since February 2012. A private report released earlier in the day also showed a gauge of services -- a key component of the Australian economy -- plunged in January.
The economy is confronting a sharp downturn in property prices that is threatening to hit consumers’ confidence through the so-called wealth effect -- even if losses on house prices so far are only on paper. When combined with stagnant wages over the past five years and household debt close to a record high, scope for consumption is constrained.
“Households are being forced to curb growth in spending as a result of weak income growth, and confidence appears to have taken a battering from heightened volatility in financial markets and falling house prices,” said Sarah Hunter, head of macroeconomics at BIS Oxford Economics in Sydney. “We expect momentum in household spending to remain subdued this year.”
The Australian dollar fell after the release, trading at 71.98 U.S. cents at 12:03 p.m. in Sydney from 72.13 cents before the data.
The data come hours before the Reserve Bank of Australia announces its first policy decision for the year, with interest rates expected to remain unchanged at a record low 1.5 percent, where they’ve stood since the last cut in August 2016. Traders are pricing in a more than 70 percent chance of a rate cut in the next 12 months.
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