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Surprisingly Strong Growth in Retail Sales in Australia
Jun 20, 2007

Retail sales in Australia grew strongly in the month of October, almost double the market forecast.

Retail sales in Australia grew strongly in the month of October, almost double the market forecast, resulted bya combination of encouraging factors like higher wages, reduced petrol prices, and an all time low rate of unemployment aided the growth.

Figures of Australian Bureau of Statistics showed that there was an increase of 0.8% in retail sales during the month of October compared to an anticipated rise of 0.6%, whereas new private capital overheads dipped by 6% in September quarter to reach US$17.847 Billion against the expected rise of 1%.

"Credit growth continues to remain robust, possibly a bit higher than the comfort levels of RBA. A good pickup was observed in retail sales, showing consistency with dipping petrol prices over the past few months", as per Warren Hogan, market economics head with ANZ Investment Bank.

Both the New Zealand and Australian dollars accelerated remarkably against US dollar after robust retail sales in Australia. The annualized speed of growth has been spurred, by the increased sales, to fastest rate from August (2004). Also overall credit was firmer than expectations, however capital overheads dropped in the Q3.

Supported by favorable economic conditions retail sales grew in October and consequently sales increased by 0.8% in that month. The low rate of unemployment, strong labor market, increased employment, and growth in wages will likely support the spending in retail.

Reduced petrol prices are expected to offer some support to purchasing power, balancing high interest rates' dampening effect. "Reduced prices of fuel will offer some relief to consumers, but expenditure will still remain rather subdued as the RBA is going to raise the interest rates once again'', as per an economist in Sydney. Consumer confidence rose by 3.9% in October with dropping prices of fuel, then tumbled 9.7% in November after the bank's interest rate move.

Retail sales make up nearly 23% of the GDP of Australia. The sector is the largest single employer offering about 15% of overall employment. Strength in the retailing of food and a bounce back in departmental stores led the augmentation in October, increasing sales to US$14.35 billion.

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