The trend in retail trade appears to have picked up.
The reasons for that pickup are not immediately obvious, but it fits a recent pattern of more positive economic data and suggests more limited scope for interest rate cuts this year.
On Wednesday the Australian Bureau of Statistics (ABS) released figures showing the seasonally adjusted value of retail turnover in May was 0.5 per cent higher than in April, following a rise of just 0.1 per cent in April and a 0.9 per cent jump in March.
Cutting through the monthly ups and downs, the bureau’s trend measure shows retail trade rising at a monthly rate of 0.4 per cent or 4.7 per cent if it continued at the current growth rate for a full year.
At the end of 2011, the monthly trend was 0.1 per cent or 1.7 per cent on an annualised basis.
The monthly retail figures are not adjusted for price changes, but quarterly data show the trend in prices was actually edging lower in the first three months of the year.
That suggests the upward trend in sales in recent months is probably all, or mostly, “real” and that the faster trend in sales is not the result of rising prices.
The pattern of increases in turnover seems to confirm this.
The Australian dollar has come down from its highs earlier in the year, but the categories showing strongest growth – food stores, and cafes and restaurants – are driven by domestic costs and demand rather than the price of imports.
On the other hand the trend in imports-dominated stores – household goods retailers, department stores and clothing and footwear stores – are relatively weaker.
It could be that the easing in oil prices has helped the retail sales figures – car yards and petrol stations are not included in the ABS survey of retailers.
And employment growth has picked up since the beginning of the year.
More jobs means more income, more confidence and more spending.
Cuts in interest rates may have boosted confidence too.
Whatever the reason, the figures suggest households are becoming a little less reluctant to spend their money.
It’s another round of economic data that’s – like gross domestic product (GDP) and jobs figures last month and the May building approvals data on Tuesday – helping to paint a more positive picture of economic growth.
It’s early days, but it’s starting to look as though the futures market’s was right to retreat over the past month from an expected one and a quarter percentage points of interest rate cuts by the end of the year to three quarters of a percentage point.
And even that, barring a new euro area meltdown, might be too much to hope for.
