Retail sales are booming with consumer electronics among the most popular of purchases alongside food. This say the experts is almost certain to lead to an interest rate raise which coupled with a Federal Election on November 24th could lead to a slow down in CE sales running into the peak buying period.
Australia’s retail sales climbed more than economists forecast in September, reinforcing speculation the central bank will raise interest rates next week.
Sales advanced 0.8 percent, matching the revised August gain, the Bureau of Statistics said in Sydney today. The median estimate in a Bloomberg News survey of 23 economists was for 0.5 percent.
A hiring boom and higher wages prompted consumers to spend more on furniture, electronics and food at retailers including at Harvey Norman Woolworths and JB Hi Fi.
A fourth monthly gain in sales, and reports yesterday that showed housing approvals jumped to a 14-month high and lending expanded in September, suggest the central bank will increase rates for a second time this year to curb inflation.
“The economy is on fire,” said Joshua Williamson, senior strategist at TD Securities Ltd. in Sydney. “The Reserve Bank has enough reasons to raise interest rates, not just once, but at least twice and possibly three times in the next six months.”
The yield on the 10-year government bond rose 5 basis points, or 0.05 percentage point, to 6.30 percent from before the report. The Australian dollar traded at 93.12 U.S. cents at 4:46 p.m. in Sydney from 93.10 cents just before the report. Earlier, the currency reached a 23-year high of 93.43 cents.
Australia’s trade deficit widened to A$1.86 billion ($1.7 billion) in September as imports of consumer goods increased and exports fell, a separate report today showed.
Economic Growth
Rising spending is the latest evidence of the strength of domestic demand. The economy grew 4.3 percent in the second quarter from a year earlier, the fastest rate in three years.
Sales of household goods, including furniture and electronics, jumped 1.6 percent in September from the previous month and sales of food increased 1.3 percent. Spending at bars, restaurants and hotels climbed 0.6 percent.
Harvey Norman, Australia’s largest furniture and electronics chain, yesterday said first-half earnings may rise as much as 35 percent amid demand for flat-panel televisions and notebook computers. The Sydney-based company said sales in the quarter ended Sept. 30 surged 12 percent from a year earlier.
The economy has expanded every year since 1991, adding to pressure on prices and wages to increase as spare capacity is used up and resources become stretched.
Twenty-six of 27 economists surveyed by Bloomberg News say the Reserve Bank of Australia will raise the overnight cash rate target to 6.75 percent on Nov. 7 to curb inflation. Most economists see the rate rising to 7 percent early next year.
“Looks Certain’
“The Reserve Bank looks certain to hike interest rates this month,” said Adam Carr, senior economist at UBS AG in Sydney. “There may be a follow-up increase, probably in the first quarter.”
The bank increased its benchmark rate in August for the first time this year. Speculation that policy makers would boost borrowing costs again intensified after a report last week showed a surge in energy and food costs stoked an acceleration in inflation in the third quarter.
The underlying inflation rate rose 3.1 percent from a year earlier, breaching the central bank’s target range of between 2 percent and 3 percent.
Retail sales, adjusted to remove the effect of inflation, rose 1.9 percent in the three months ended Sept. 30 from the previous quarter, today’s report showed. That beat economists’ expectations for a 1.6 percent gain.
Wages, Employment
Australia’s economic growth is accelerating as China’s appetite for raw materials drives prices and profits at mining companies, prompting them to expand and hire more workers. The commodities boom has flowed through to the wider economy, leading to a pickup in wages and consumer spending.
The jobless rate has fallen to a 33-year low of 4.2 percent. The key measure of wages gained 1.1 percent in the second quarter, equaling the strongest quarterly increase since the series began in 1997.
Reports yesterday also highlighted the August interest-rate increase has failed to quell domestic demand.
The number of approvals to build or renovate houses and apartments climbed 6.8 percent in September, almost seven times as much as economists forecast. Lending to consumers and businesses rose a more-than-expected 1.2 percent from August.