MNI ANALYSIS: Australia Retail Sales Drop Backs RBA Caution

     SYDNEY (MNI) -  - Australia's retail sales fell sharply in August, matching

a pace last seen in March 2013, pointing to soft household consumption this

quarter. 

     The weak data support the Reserve Bank's on-hold-for-longer monetary policy

stance.

     Retail sales fell 0.6% m/m in August, following a downward revision in July

sales to -0.2% from flat outcome originally reported, data published by the

Australian Bureau of Statistics Thursday show. The fall was due to declines in

four of the six retail industry groups, with food-related categories performing

the worst.

     The biggest worry, however, is a soft spell seen in household goods

retailing, which fell 1.0% m/m in August, after a 2.1% drop the month before,

and in trend terms declining 0.1% -- the first fall since January this year.

While department store sales rose 0.7% m/m in August, in trend terms they were

down for four months in a row, with the August down trend accelerating to -0.6%

from -0.5% in July.

     Overall retail sales in trend terms rose 0.1% m/m in August and July, but

this slowed from the 0.3% pace in May.

     The data shows why the RBA continues to hold a cautious view on the economy

despite stronger-than-expected data in recent months, particularly strong

employment growth and rise in infrastructure spending. In the cash rate

statement published Tuesday, the RBA omitted any reference to retail sales but

signaled its concern through its view on slow growth in real wages and high

levels of household debt that are likely to constrain growth in household

spending.

     In other data released Thursday, the international trade surplus widened in

August, due mainly to a 2% rise in non-rural goods exports. Metal ores and

mineral exports rose 10% and were partly offset by a 3% decline in coal exports

and a decline in non-monetary gold exports.

     Imports were flat m/m as a 4% fall in consumption imports and 3% drops in

capital goods imports were offset by a 4% rise in intermediate goods.

     In original terms, exports fell in three of the six large commodity

categories. Coking coal exports fell for the second straight month due to a

decline in unit value for the third straight month. Iron ore exports of both the

lump and fines categories rose in August but lump volumes fell 3% m/m and have

been weak for three straight months. Significantly, liquefied natural gas

exports fell for the second straight month as both volumes and unit value fell. 

     Below is table for Retail trade data for August:

                                               August                       July

--------------------------------------------------------------------------------

                                   (M/M %, seasonally         (M/M %, seasonally

                                            adjusted)                  adjusted)

Retail Sales                                     -0.6    -0.2 (revised from 0.0)

MNI Median                  +0.2 (range -0.3 to +0.4)

Food Retailing                                   -0.6                       +0.4

Household Goods                                  -1.0                       -2.1

Clothing, Footwear etc                           -0.2                       -0.4

Department Stores                                +0.7                       -2.8

Other Retailing                                  +0.1                       +1.1

Cafes, Restaurants,

Takeaways                                        -1.3                       -0.1

     Below is table on International-trade data for August:

                                         August                             July

--------------------------------------------------------------------------------

                                        (in A$)                          (in A$)

                            Seasonally Adjusted              Seasonally Adjusted

Trade                                                +808 mln (revised from +460

Balance                                +989 mln                             mln)

                +800 mln (range +500 mln to 1.4

MNI Median                                 bln)

Exports                               32.23 bln                        32.06 bln

Imports                               31.24 bln                        31.26 bln

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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