Household spending growth is forecast by retailers such as Woolworth's Ltd. to slow this year as Reserve Bank of Australia Governor Glenn Stevens boosted the overnight cash rate target this week by a quarter percentage point to 4.5 percent, the sixth such move in seven meetings. Stevens described the moves as a "significant adjustment," a signal policy makers may keep borrowing costs unchanged in coming months.
While "consumer confidence has proven resilient to rate increases, retail sales tell a different story," Helen Kevans, an economist at JPMorgan Chase & Co. in Sydney, said ahead of today's report. "Consumer spending will make a lackluster contribution to first-quarter gross domestic product."
Retail sales, adjusted to remove inflation, rose 0.1 percent in the three months through March from the previous quarter. Economists forecast a 0.3 percent increase.
http://www.businessweek.comSpending on household goods declined 1 percent and food retailing rose 0.3 percent, today's report showed. Consumers spent 1.4 percent more on clothing.
Weaker Sales
Woolworths, Australia's biggest retailer, cut its annual sales growth forecast on April 30, saying revenue may rise 3 percent to 6 percent in the 12 months ending June. By contrast, the company forecast on Feb. 26 that sales would grow in the "upper single digits."
Policy makers boosted Australia's benchmark lending rate in March, April and this week, adding to three straight monthly moves in the fourth quarter of 2009.
Those moves, which have increased the benchmark interest rate by 150 basis points from a half-century low of 3 percent, are adding about A$3,600 a year to loan repayments on an average A$300,000 mortgage.
Still, consumer confidence remains robust, stoked by an unemployment rate that is almost half the level of that in the U.S. and Europe.
Employers have added almost 200,000 jobs since August, the biggest six-month surge in more than three years, cutting the jobless rate to 5.3 percent.
Investors are betting there is a 12 percent chance of a quarter-point increase in the benchmark lending rate on June 2, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 9:01 a.m.
