Daily Commentary BY THE CURVE TEAM –

Retail Sales Disappoint but RBA Still Expected to Hold

5th of November, 2019

The RBA is expected to leave rates on hold at today’s meeting but a last minute data point has complicated their outlook.

Data out yesterday for Q3 retail sales has greatly disappointed the market. With volumes down 0.1% for the Q3 we have now seen 0.1% declines in 3 of the past 4 successive quarters. This has let to a combined reduction in volume of 0.2% over the past 12 months. That is despite a 1.6% growth in the Australian population over the same period.

Retail sales isn’t a complete picture of consumer spending as it does’t account for the services sector which is around twice the size as retail. However, it does pose serious questions to the medium term inflation outlook as the market would have expected to see some effect of tax and interest rates cuts in this data point. A more concerning thought it that this data does contain the effect of that stimulus but it has still not been enough to get consumer to spend.

With the RBA set to meet this afternoon it will be interesting to hear their view as to whether the effect of recent stimulus is present in yesterday’s data, however it may not be until Friday’s SoMP that we get an answer to that. Additionally, today we will likely see the release of the new Statement on the Conduct of Monetary Policy, the agreement between the RBA and the government. It is unlikely that the statement will see any large changes but key technical adjustments will be of interest.

Matthew Dunshea

Client Relationship Manager