If we didn’t have a recession, we would have had a rate rise Tuesday.
The latest building approvals, retail sales and trade figures all came in significantly better than expected by the markets and the Reserve Bank, already worried by inflation, would have moved to try and slow surging demand in the economy.
But we do have a recession, so the better than expected performance in three key areas of the economy is good news and will help lighten the gloom of warnings from an alarmist Government of budget deficits of up to $50 billion.
So the prospects of further interest rate cuts have been diminished by the better reports from retailing and exports, even though the second highest surplus in history was driven by a slump in imports because of the recession.
Government stimulus spending and 4% of interest rate cuts seems to be doing the trick, keep consumption buoyant while the pace of the domestic slump cuts demand for capital goods.
Retail sales jumped 2.2% in March from February, reversing the sharp fall in that month, while our trade surplus rose 43% in March from February’s revised surplus, to a near record $2.5 billion.
A sharp fall in imports of capital goods (and a fall in imports of non-monetary gold) more than offset a small but significant rise in consumption goods, especially textiles, clothing and footwear (up $340 million in the month overall).
Coming on top of stronger than expected building approvals, especially for new homes as the first home buyers scheme kicked in March (up 3.5% overall and 2.8% for new private dwellings), it’s clear that a combination of the Federal Government’s two stimulus packages and the slumping level of demand is helping steady the economy, and our trade performance.
While the April jobs and unemployment figures today won’t be good, that has already been factored into the Reserve Bank’s thinking on the health of the economy and future direction for rates.
The rise in retail sales was bigger than the market had expected (up 0.5%).
Its more evidence that the spending boost from the start of the second stimulus package is working its way through the economy and will show up in April and probably May’s retail sales figures.
The ABS said: The seasonally adjusted estimate increased by 2.2% in March 2009. This follows a decrease of 2.0% in February 2009 and an increase of 0.5% in January 2009.
"In seasonally adjusted terms, all industries had an increase in March 2009 – Food retailing (+0.4%), Department stores (+13.2%), Clothing and soft good retailing (+6.4%), Household good retailing (+1.3%), Other retailing (+1.5%) and Cafes, restaurants and takeaway food services (+1.4%).
"In seasonally adjusted terms, all states, except the Australian Capital Territory (-0.1%), had an increase in March 2009 – New South Wales (+1.2%), Victoria (+2.7%), Queensland (+3.2%), South Australia (+2.4%), Western Australia (+2.2%), Tasmania (+2.2%) and the Northern Territory (+4.2%)."
"In original terms, Australian turnover increased by 6.4% in March 2009 compared with March 2008," the ABS said.
And even though major retailer, David Jones found it tougher going in March, it says sales improved last month.
David Jones reported a 9.2% fall in third-quarter sales revenue compared to the previous year.
On a like-for-like basis, sales fell by 10.8% in the quarter, leading to a fall of 8.7% on that basis over the first nine months of the financial year.
And the retailer reaffirmed its full-year profit guidance of zero to 5% growth after reporting sales of $411.6 million of merchandise in the quarter ended April 25, compared with $453.3 million in the same period last year.
The company’s shares rose, then retreated on the news to end steady on the day to end down 4 cents at $3.28.
