UPDATE 1-Australia retail sales jump most in 3 years

Wed Apr 3, 2013 9:12pm EDT

(Adds market, analyst reaction)
    * Retail sales surge 1.3 pct in Feb, vs forecasts of +0.3
    * Home building approvals also beat estimates with a rise of
3.1 pct
    * Lifts A$ as market lengthens odds on another rate cut

    By Wayne Cole
    SYDNEY, April 4 (Reuters) - Australian retail sales surged
1.3 percent in February, far above expectations and the biggest
rise in over three years, the clearest sign yet that consumer
demand is responding to lower interest rates.
    Thursday's data from the Australian Bureau of Statistics
also showed approvals to build new homes climbed a
stronger-than-expected 3.1 percent in Feb, adding to the upbeat
news and lifting the local dollar almost half a U.S. cent.
    The data seemed the justify the Reserve Bank of Australia's
(RBA) confidence that past rate cuts are working to fuel demand
in the economy, and investors immediately responded by further
lengthening the odds of any further easing this year.
    "Clearly very strong, very surprising," was the reaction of 
 Stephen Walters, chief economist at JPMorgan, the data.
    "Near-term chances of a rate cut are very slim," he added.
"I think the Reserve Bank has been looking for a few things --
one of them has been whether the household sector has been
recovering and on this evidence they clearly are."
    The RBA held rates steady at 3 percent at its April policy
meeting this week in large part because of signs past interest
rate cuts were percolating through the economy.
    The 1.3 percent rise in retail sales blew away forecasts of
a 0.3 percent increase and was the largest monthly gain since
November 2009. It also followed an upwardly revised 1.2 percent
rise in January.
    The spending was also broadbased, with every retail sector
enjoying gains of over 1 percent for the month. Sales of
household goods jumped 1.6 percent, clothing was up 1.2 percent,
department stores 1.6 percent and eating out 1.3 percent.
    The Australian dollar shot to $1.0482 on the upbeat
news, though it could not clear heavy options-related offers at
$1.0500, a major chart level.
    Interbank futures <0#YIB:> reversed course while swap rates
showed the market was pricing in around 15 basis points of rate
cuts over the next 12 months, compared to 20 just before the

 (Editing by John Mair)