On the whole, goodish news for the economy from yesterday’s two major data drops from the Australian Bureau of Statistics – retail sales and building approvals for February.
But as the AMP’s Chief Economist, Dr Shane Oliver noted yesterday the “retail sales and building approvals data do not alter the outlook for interest rates where we continue to see the RBA remaining on hold into 2019.”
The strength in February’s retail sales was driven by household goods, clothing and department stores. The latter may be just a bounce after months of weakness and increased discounting may have played a role.
Retail sales climbed 0.6% in February, against market forecasts for a 0.3% rise. That followed an upwardly revised 0.2% gain in January (0.1% gain originally reported).
The ABS said there were rises in every single state and territory except Western Australia and Queensland.
All sectors saw rises led by household goods which added 1.1%. Clothing and footwear also rose 1.1% (after two successive monthly falls). Cafes, restaurants and takeaway food grew 0.7% while department stores bounced 1.5% after declines in each of the preceding three months.
That was probably more a ‘sympathy rise’ as shoppers who had ignored the Christmas-New Year sales promotions went hunting for unsold bargains.
The February rise also follows a couple of weak months for the sector generally, especially the important December Christmas period which disappointed.
With wages growth remaining weak at around 2% annual and the positive wealth effect from rising property prices vanishing to become a negative wealth effect from falling property prices in Sydney and Melbourne, in particular, Dr Oliver said “it’s likely that underlying retail sales growth will remain soft for some time to come."
And housing sector shows isn’t dying, as many forecasters believe and in fact the signs remain encouraging. Building approvals fell at a faster pace than forecast in February as the number of apartments fell for a fifth month in a row.
Building approvals fell 6.2% from January from a revised 17.2% increase in the previous month (17.1% originally).
That was a sharper drop than the 5% market forecast. Approvals for apartments, townhouses etc fell 16.4% in seasonally-adjusted terms while approvals for private sector homes rose 1.9%.
In year-on-year terms approvals fell 3.1%. but private housing approvals are up nearly 7% year on year, suggesting there’s still a bit of life left in the home building sector for the rest of 2018.
The AMP’s Dr Oliver wrote yesterday: “while approvals are running down from their 2015 highs, the level of approvals remains high historically suggesting no sharp collapse in dwelling construction activity on the horizon.”
"In fact solidly rising approvals for alterations and additions suggest that total dwelling construction activity may actually grow a bit over the year ahead.”
