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Record quarter for retail sales a shot in arm for GDP

Australian retail sales soared to a record high in the final three months of 2021, fuelled by a combination of relaxed virus restrictions and holiday shopping that are set to underpin a robust rebound in the economy.

Sales surged 8.2 per cent in the fourth quarter, recovering from a sharp drop in the prior period when NSW and Victoria were in lockdown to combat a virus outbreak, Australian Bureau of Statistics data showed Monday. The gain outpaced economists’ expectations of a 7.8 per cent increase.

“Consumers enthusiastically returned to discretionary spending following the end of delta related lockdowns,” Ben James, director of quarterly economy wide statistics at the ABS, said.

“Well publicised concerns over product availability and delivery timeliness led to consumers bringing forward their end of year shopping, in conjunction with a re-opening spending splurge due to pent up consumer demand,” he said.

The result will boost policy makers’ confidence that the $2.1 trillion economy is on track for a solid recovery from a pandemic-induced contraction in the third quarter. A surge in household spending is among reasons economists expect the Reserve Bank of Australia to raise interest rates in the second half of this year.

At the same time, trade data released last week showed a corresponding surge in imports in the final three months of 2021 — also fuelled by high household demand — which is likely to take a cut out of GDP growth in the period.

The early part of this year is also likely to prove challenging for retailers as a surge in new cases of the Omicron variant of coronavirus is prompting caution among consumers. This was reflected in a survey of job advertisements by big four bank ANZ, showing a 0.3 per cent fall in January.

Still, economists predict hiring will resume strongly, with the jobless rate already having fallen to 4.2 per cent in December, just prior to the omicron outbreak.

“It now seems that an unemployment rate with a 3-handle, and much lower underemployment, will come a lot sooner,” said Catherine Birch, a senior economist at ANZ. “This is one reason we now expect the RBA to start lifting the cash rate in September.”

Monday’s retail report showed:

  • Clothing, footwear and personal accessories led gains, soaring 43.1 per cent
  • Cafes, restaurants and takeaway food services jumped 18.8 per cent
  • Food retailing — down 1.6% — was the only industry to fall
  • Sales volumes are now at their highest quarterly level of the series

The release of consumer demand from NSW and Victoria saw them lead retail gains, jumping 15.3 per cent and 10.2 per cent, respectively.

Bloomberg

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