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Australian retail sales rebound in January as economy resists Omicron

By on February 28, 2022 0
  • January retail sales +1.8% vs. forecast +0.4%
  • Housing loans up 7.7% per year
  • Momentum continues in Q1, with Q4 GDP jumping 3%

SYDNEY, Feb 28 (Reuters) – Australian retail sales were surprisingly strong in January as buyers resisted a surge in Omicron business with aplomb, suggesting the economy maintained considerable momentum in the new year.

Data from the Australian Bureau of Statistics released on Monday showed retail sales rose 1.8% in January to 32.5 billion Australian dollars ($23.3 billion), the second highest level ever recorded and easily exceeded forecasts of a 0.4% gain.

This followed a 4.4% decline in December, skewed by the popularity of online sales which had driven spending in November.

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Banks’ weekly card spending figures show activity quickly picked up once coronavirus cases began to decline in mid-January and are now well above levels of it a year ago.

“With new virus cases down to just a quarter of their mid-January peak, AppleMaps routing requests are now well above their 2020 levels and visitor numbers at retail and leisure facilities also rebounded,” said Marcel Thieliant, senior economist at Capital Economics.

The Russian invasion of Ukraine and the resulting spike in commodity prices have added another layer of uncertainty to the outlook, although the impact on Australia so far has been minor.

“Australia’s trade relationship with Russia and Ukraine is negligible,” said Gareth Aird, head of Australia’s economy at the CBA. “We expect the economy to be largely isolated provided the major military powers in Europe and the United States do not fight Russia in Ukraine or elsewhere.”

Rising gasoline prices could act as a tax on consumers, while adding to inflationary pressure, making policy more difficult for the Reserve Bank of Australia (RBA).

So far, the central bank has said a first rate hike could come later this year if the economy continues to improve, although markets are pricing in a 0.25% hike as early as July.

The central bank holds its March policy meeting on Tuesday and is seen as certain to keep rates at 0.1%.

Markets will be eager to see its reaction to the sudden bout of geopolitical uncertainty and recent data showing that wages rose only modestly in the fourth quarter of last year.

Other data released on Monday showed households continued to borrow heavily, with mortgage lending operating at an annual rate of 7.7% in January amid a booming housing market.

Gross domestic product (GDP) figures for the December quarter are due on Wednesday and are expected to show economic growth rebounded 3% as an easing of coronavirus lockdowns triggered a wave of pent-up consumer spending.

($1 = 1.3924 Australian dollars)

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Reporting by Wayne Cole; Editing by Tom Hogue and Kim Coghill

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