Daily Commentary BY THE CURVE TEAM –

Spending Resilient

22nd of April, 2021

Retail sales held up over April despite a quirk in the data showing an underwhelming annualised figure.

Preliminary data show sales rose 1.4% over March. Sales fell 0.8% in February as Victoria and WA had covid scares.

Those two states led the gains in March, with Victoria and WA up 4% and 5.5% respectively as their spending recovered. The annualised increase changed from 9.1% in February fell to 2.3% for March.

This was due to the pre lockdown spike in sales no longer being counted in the annualised figure, so the fall in sales when lockdowns hit has an outsized effect on annualised figures. Next month the April 2020 dip in sales will no longer be included in the annual figure so it will likely recover.

That spending remains resilient is very positive for the economy. A regression to levels closer to pre-covid spending is anticipated, but the longer this is delayed the more the economy will benefit.

Overseas, the Bank of Canada (BoC) have reduced their QE purchases by 25%. House prices in Canada have risen much more sharply than Australia and their vaccination program has seen over 10 million Canadians receive a dose.

Add a positive economic recovery and the BoC viewed current QE purchases as excessive. Eventually it is expected other central banks will follow suit and reduce their stimulus but how hastily this occurs is disputed.

Josh Stewart

Associate - Money Markets