November 2, 2018 / 2:34 AM / 17 days ago

UPDATE 1-Australia Q3 retail sales worst in 1-1/2 years, bodes poorly for economy

* September retail sales up 0.2 pct vs 0.3 pct consensus

* Q3 chain volume sales up 0.2 pct vs 0.4 pct consensus

* Q3 data suggests household consumption weighed on GDP (Updates currency level in paragraph 4, adds retail, inflation details in paragraph 10)

By Swati Pandey

SYDNEY, Nov 2 (Reuters) - Australian retailers faced another month of sluggish sales growth as consumers, nervous about stagnant wages and tumbling house prices, curbed spending in a sign third-quarter economic growth could disappoint.

Friday’s data from the Australian Bureau of Statistics (ABS) showed retail sales rose a meagre 0.2 percent in September, missing expectations for an already slow 0.3 percent rise in a Reuters poll. This follows a gain of 0.3 percent in August and a flat outcome in July.

Adjusting for inflation, sales grew 0.2 percent for the whole third quarter, the weakest outcome since March 2017 and compared with a robust 1.2 percent in the prior three-month period.

The below-expected figures capped a week of underwhelming economic data on building approvals, inflation and house prices, and toppled the Australian dollar from a one-month peak touched earlier to a day’s low of $0.7195.

Friday’s data implies a risk private consumption didn’t add much to overall economic growth in the September quarter. It also casts a shadow on the Reserve Bank of Australia’s (RBA) forecasts for the A$1.8 trillion economy to grow at an annual pace of over 3 percent over the next two years.

“The figures are a bit on the softer side,” said Ben Jarman, Sydney-based senior economist at JPMorgan.

“The (Q3) volume number...does suggest that the next GDP reading is off to a pretty soft start as far as the household consumption component goes.”

The RBA fears ballooning debt in Australia’s red-hot property sector will limit consumers’ ability to spend elsewhere in the economy, one reason it has held rates at an all-time low 1.50 percent since August 2016.

Australia’s retail sector showed some signs of life earlier in the year, but faces several headwinds amid a downturn in the country’s once-booming property market, sluggish wages and stratospheric household debt.

Food retailing and eating out were the only bright spots in Friday’s data. Department stores, clothing and household goods were either flat or negative.

In addition, there was hardly any signs of inflation in the report with the retail price deflator rising just 0.4 percent.

Reflecting the broader softness, Australian online retailer Kogan.com released a dismal September-quarter update earlier this week while budget jewellery chain Lovisa also projected a “challenging” outlook for the period ahead, led by “weakness in the Australian market.”

Already, retail stocks such as JB Hi-Fi, Harvey Norman, Super Retail Group and Myer have lagged the broader market since the beginning of this year.

They are down 8-27 percent so far this year compared with a near 4 percent fall in the benchmark S&P/ASX 200 index. (Additional reporting by Kate Ashton in SYDNEY; Editing by Sam Holmes)

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