(Adds market, analyst reaction)
* Retail sales fall 0.2 pct in Dec, surprisingly weak for
* Inflation-adjusted sales also soft, rising just 0.1 pct in
* Adds to chance of more rate cuts, jobs data now in focus
By Wayne Cole
SYDNEY, Feb 6 Australian retail sales fell for a
third straight month in December, an extremely rare run of
weakness that strengthened the case for further cut in interest
rates and knocked the local dollar lower.
Wednesday's data from the Australian Bureau of Statistics
showed retail sales dipped 0.2 percent in December to A$21.42
billion ($22.3 billion), upsetting forecasts of a 0.3 percent
increase. The last time sales fell for three months in a row was
in late 1999/early 2000.
Annual growth in sales slowed to just 2.3 percent, less than
half the pace that used to be considered normal, and came
despite rate cuts in both October and December.
The poor result nudged the local dollar down a
quarter of a cent to $1.0375 and sharpened speculation of
further cuts in rates.
The Reserve Bank of Australia (RBA) held its main cash rate
steady at 3 percent on Tuesday, saying there were signs its past
easing was starting to work, albeit slowly.
Yet it also left the door wide open for an easing should the
economy disappoint in coming months. Investors think it will
have to follow through and are priced for a quarter-point cut in
April or May <0#YIB:>.
"Weak data with downward revisions as well as a
weaker-than-expected monthly number and also very weak real
retail sales growth," was how Matthew Johnson, an interest rate
strategist at UBS, summed up the sales report.
He felt the figures raised the stakes ahead of employment
data for January on Thursday.
"We need to see jobs (data) tomorrow. I think there is a
50-50 chance for a cut in March, but if we see weak jobs with a
5.6 percent unemployment rate, that will do the trick."
Analysts are tipping a slight rise of 5,000 in employment,
with the jobless rate edging up a tick to 5.5 percent.
NOT GOOD FOR GROWTH
Wednesday's figures also showed that sales for the whole
fourth quarter edged up by just 0.1 percent when adjusted for
inflation, again under forecasts.
That suggested retail sales alone had added little to
nothing to gross domestic product (GDP) in the quarter.
"It's quite hard to get a good GDP number without good
retail sales, so this puts some downside risk around GDP," said
The GDP numbers are not due until March 6, a day after the
RBA's next policy meeting.
The A$260 billion retail sector accounts for 17 percent of
Australia's A$1.5 trillion in annual economic output and, with
10 percent of all jobs, is the second-biggest employer after the
The industry has been suffering in the face of intense
foreign competition as a high local dollar makes imports
cheaper. Australians have also become more cost-conscious,
choosing to save more and borrow less.
Yet people are still spending, just on other things.
Services, particularly healthcare and education, are taking
an ever bigger share of the pie, as is foreign travel. The high
dollar encouraged Australians to holiday abroad in record
numbers last year, gifting their cash to foreign retailers.
Low rates on auto loans also helped drive a record year for
new vehicle sales, with sport utility vehicles in hot demand.
(Editing by John Mair)