Economists say recent figures show retail spending growth is on trend, but homebuyers appear spooked by uncertain economic factors.
Retail spending rose by a modest 0.2 per cent in October, which was lower than market expectations, according to official figures.
Year on year, Australian retail sales rose 2.8 per cent in October 2011 compared with October 2010.
Retail trade rose in the month to a seasonally adjusted $20.951 billion, compared to a downwardly revised $20.899 billion in September, the Australian Bureau of Statistics said on Thursday.
Economists’ forecasts had centred on a 0.4 per cent rise in retail sales in the month of October.
Meanwhile, Australian residential building approvals fell 10.7 per cent to 10,484 units in October, seasonally adjusted.
This compares to a downwardly revised 11,889 units in September.
In the year to October, building approvals were down 29.8 per cent, the Australian Bureau of Statistics (ABS) said on Thursday.
ICAP senior economist Adam Carr said the retail figures were “okay”. “They were barely positive, but its the fourth consecutive month of increase, so it’s not a negative story but its not a fantastic number.
“Overall sales are doing okay, but it’s the approvals that are the real worry.
“The broad trend in retail trading is that we’ve seen a pick up, but this suggests that it’s modest.”
Carr said the data would not be likely to have a strong influence on the Reserve Bank of Australia’s cash-rate decision next week.
“I’m more concerned about the central banks’ activity this week - it seems to indicate a case to ease,” he said.
ANZ Senior Economist Julie Toth said she did not believe the weaker than expected retail trade figures would weigh heavily on the RBA’s board members when they decided whether or not to cut interest rates next week.
“It is very much a line ball decision for December, these data do indicate that the consumer side of the economy is still relatively weak,” she said.
“I don’t think these data would have major implications for the RBA.”
She said the figures showed retail growth was strongest in the food sector while non-food retailers, especially department stores, were continuing to struggle.
“Food retailing saw a 0.5 per cent month on month growth compared to just 0.1 per cent for non-food retailers.”
The data also provided further evidence of the two-speed economy with resource-rich Western Australia recording the highest growth while New South Wales suffered a 0.1 per cent decline in retail turnover.
“We’re seeing a little bit of that two speed story - stronger in WA, less so in New South Wales and Queensland.”
HSBC chief economist Paul Bloxham said the retail trade numbers were a positive sign.
“The retail numbers were pretty solid, trend growth is continuing at around the same pace as we’ve seen over recent months,” he said.
“The building approvals numbers were quite a surprise on the downside, in particular we’ve seen a (18 per cent) fall in house approvals in Victoria.
“I think the overall story here really is, if you put it in the context of the last couple of days of data, is the Australian economy is looking all the more multispeed.
“Retail is looking like it is growing modestly, housing is weak and the mining sector is booming.”