By Wayne Cole
SYDNEY (Reuters) – Australian retail sales dipped in December as pay back for a Black Friday splurge the month before, but discounting helped shoppers make a desperately-needed contribution to economic growth over the whole fourth quarter.
Data from the Australian Bureau of Statistics (ABS) on Monday showed retail sales fell 0.1% in December from November, when they had risen by 0.7%.
The outcome was firmer than analyst forecasts for a 0.7% drop, helped by Cyber Monday promotions falling in December this year and discounting spread across the month.
“Cyber Monday drove more spending on household goods as consumers took advantage of discounts on big ticket items,” said Robert Ewing, head of business statistics at the ABS.
Fourth quarter sales rose a real 1.0% to A$105.8 billion ($64.93 billion), topping forecasts of a 0.8% gain and the biggest increase since early 2022.
Discounting also drove the increase in volumes as households spent some of the billions in tax cuts and subsidies doled out by the government in the second half of the year.
The spending should add around 0.2 percentage points to gross domestic product, a small but vital contribution given the economy had been flatlining under the burden of high mortgage rates and cost-of-living pressures.
Some relief on borrowing might be on the way with markets betting heavily the Reserve Bank of Australia will deliver its first rate cut in four years when it meets on Feb. 18.
Futures imply a 95% probability the 4.35% cash rate will be lowered by 25 basis points, and have two such easings priced in by year end.
The central bank signalled it was open to a move back in December and a surprisingly soft inflation report out last week seemed to open the door to an early shift.
“Disinflation has proceeded faster than the RBA expected, so the Board will have the required confidence to start the rate-cutting phase,” said Luci Ellis, chief economist at Westpac.
“We see the RBA as remaining data-dependent from here and not in a hurry to move further,” she added. “Conditional on further declines in inflation and some softening in the labour market, we see cuts in May, August and November, taking the terminal rate to 3.35%.”
Adding to the case for an easing was the risk to global trade from U.S. President Donald Trump’s tariffs on China, Mexico and Canada.
Australia is a major exporter of resources to China and taxes on its trade could hinder economic growth there and its demand for commodities.
Markets reacted by knocking the Aussie dollar down 1.6% to its lowest since the 2020 pandemic at $0.6115.
($1 = 1.6295 Australian dollars)
(Reporting by Wayne Cole; Editing by Kim Coghill and Christian Schmollinger)
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