Daily Commentary BY THE CURVE TEAM –

Trade and Retail Data Backup GDP

5th of March, 2021

Strong numbers for the trade balance and retail sales bode well for economic activity to start 2021.

The trade balance hit a record high over January at $10.1 billion. This was off the back of a 6.2% increase in exports and 2.3% fall in imports.

A theme has emerged recently with the trade balance, which is rising commodity prices, supply restrictions and demand from China driving export values higher. Imports have been less predictable. With the fall this month speculated to be related to the higher Australian Dollar which makes imports cheaper

Retail sales remained strong over January despite lockdowns across the country, up 0.5% and 10.6% on last year. Following Q4 GDP yesterday which showed consumption lifted markedly, these retail sales are evidence that momentum in spending is continuing.

A clear pattern has emerged for lockdown periods, where online sales increase relatively more than physical. Over January online sales were up 1.05% whereas physical sales were up 0.1%. Online still accounts for only 10% of sales.

The categories of spending also tend towards food and household goods, which were up 1.6% and 0.1% respectively. Whereas clothing and footware was down 3.6%, department stores down 0.4% and cafes and restaurants down 0.8%. It’s also worth noting the growth rates in sales across the states is for the most part aligned, which was a rarity in 2020.

Overseas, Jerome Powell appeared for a virtual conference. The market perceived his references to monetary policy as being insufficient to reign in the recent rise in Treasury yields.

Yields in treasuries once again rose, which sent equity markets down. This will likely flow through to long ended yields in Australia and will add to the volatility in markets.

Josh Stewart

Associate - Money Markets