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Retail and construction data show economy’s weak points

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By Garry Shilson-Josling, AAP Economist

Construction work and retail trade figures confirm the economy has plenty of weak patches amid the areas of strength from the mining boom.

Retail turnover rose by 0.3 per cent in January, after adjusting for the regular seasonal pattern, figures from the Australian Bureau of Statistics (ABS) on Wednesday showed.

On its own, that would have been a reasonable monthly rise, but it could not make up for the weakness of the preceding three months when sales barely changed. From a year earlier, turnover was up by only 2.7 per cent.

And the bureau’s estimate of the trend in turnover showed an annualised growth rate of just 0.7 per cent between December and January.

The December figures, released a month ago, included estimates of sales in both value and volume term which implied annual price rises averaging 1.6 per cent.

If that rate of price increases persisted in the year to January, real growth – aside from inflation – would have been only a little over one per cent, a weak result no matter which way it’s sliced.

There was plenty of weakness also in the ABS estimates of construction work done in the December quarter. Overall, the volume of work done fell by 4.6 per cent. Over the year to December, it was still up by 9.2 per cent, thanks to a 27 per cent rise in engineering construction generated by the mining investment boom.

In contrast, building construction was down by 4.0 per cent in the quarter and by 9.0 per cent for the year, with the non-residential building sector recording steeper falls than housing.

Building work done – that is, construction work aside from the roads, mines, pipelines and the like counted as engineering – in the December quarter was less than two per cent above the low point reached in the June 2009 quarter in the midst of the global financial crisis.

It’s unlikely that the Reserve Bank of Australia (RBA) will see this as evidence that the economy is undershooting its forecasts, rather than the re-allocation of resources being spurred by the mineral commodity price boom.

Accordingly, the numbers should not change the outlook for the cash rate which, according to the futures market, does not include a reduction by the RBA after its board meeting on Tuesday.