August 27, 2021

Falling Australian Retail Sales A Poor Sign For RBA?

 Australian retail sales fell lower in July as many shops and services closed following sanctions measures implemented in major cities amid a growing contagion of delta variants.

Most recently, the Australian Bureau of Statistics (ABS) reported retail sales contracted by 2.7% last month from a 1.8% decline recorded in June. This is the biggest decline of the year and even worse than the market forecast for a 2.3%fall.

The US $ 360 billion retail sector accounts for around 18% of gross domestic product and further weakness is expected this month as closures hit Melbourne and Canberra.

Meanwhile, sales in the state of New South Wales (NSW) plunged nearly 9% in July, and a similar decline is likely to happen for Victoria in August.

In the wake of this disappointing reading, analysts are once again predicting that the Reserve Bank of Australia (RBA) will withdraw plans to make a reduction in bond purchases at its September policy meeting.

Earlier, the RBA maintained its plan to reduce bond -buying rates from early September. Still, with daily case figures having reached over 1000 for the first time since the pandemic hit the country, policymakers are likely to reconsider the decision.

Following the publication of the data, the Aussie dollar traded little changed around 0.72360 against the US dollar during the Asian session.