Weaker Avocado Sales Telling Us Something?
Shane Oliver | Jan 11, 2019 13:11
Originally published by AMP Capital
- Australian retail sales rose 0.4% month on month in November, but annual growth slowed to 2.8% year on year.
This was a bit greater than expected and follows a run of soft Australian economic data releases since Christmas for credit, house prices, building approvals, car sales, job ads and business conditions PMIs.
We see retail sales growth being weak over the year ahead (averaging around 2.5-3% annual growth) as jobs growth slows, wages growth remains weak and falling house prices weigh on consumer spending via a negative wealth effect making households want to increase their saving rate (in contrast to the falling trend in the saving rate seen in recent years). Weak pricing power will also weight on nominal retail sales growth. Reports of weaker than expected avocado sales – less demand for smashed avocado and feta on rye toast? – may be telling us something.
While reasonable growth in November and October retail sales are consistent with a better contribution to growth from consumer spending to December quarter GDP growth, it’s hard to see it being sustained. Our assessment remains that the next move in official interest rates will be a rate cut thanks to sub-par growth, the negative impact of falling house prices, weak wages growth and sub-target inflation.
Get The App
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.