Monthly retail sales in Australia drop to the worst in 2.5 years

The Australian Bureau of Statistics announced the monthly retail sales report on Thursday that printed December’s data as the worst in two and a half years. Analysts attributed the sharp decline in retail sales to the bushfires in Australia’s south-eastern coast that continue to keep its largest cities like Melbourne and Sydney under a smoke haze.

Owing to discouraged shoppers, retail sales saw a 0.5% decline in December that marked the steepest fall since August 2017. Analysts had forecast a significantly lower 0.2% decline on the retail sales front. Retail sales came in at A$27.77 billion in December. November’s data was also revised and upgraded to a monthly gain of 1%.

Australia Has Avoided Recession In Almost 3 Decades

Australia’s economy is currently valued at A$2 trillion and has a reputation for avoiding recession for almost three decades. In recent months, however, owing to the unusually high debt and stagnant wages, consumers have been struggling and resorting to minimizing spending that has weighed heavily on the economy at large.

On top of that, the bushfires also added to economic uncertainty. Being a prominent trading partner for Australia, China’s ongoing crisis regarding the coronavirus outbreak is restraining the Australian economy further.

On a quarterly basis, however, the data suggests slow but rising signs of economic improvement with a 0.5% inflation-adjusted gain in sales (better than expected) in the recent quarter following a 0.1% decline that was reported in the prior quarter.

According to the experts, however, much of the pick up in the recent quarter was attributed to the Black Friday promotions. With nothing blockbuster to extend the gain further, the data is likely to point back downwards in 2020’s first quarter.

RBA Cut Rates Three Times To 0.75% In 2019

The slump in economic activity is the greatest challenge posed to Prime Minister Scott Morrison. PM Morrison has promised the nation that he will ensure the efficient rebuilding of the communities that were ruined by the bushfires.

The drop in consumption is even dire for the country since the Reserve Bank of Australia (RBA) has already cut rates three times to 0.75% in 2019. Government giveaways also failed to offer long-term support to the economy with billions being saved in tax rebates rather than spent.

The Australian dollar lost strength in the forex market immediately after the release of the retail sales report. Against the greenback, AUD dropped from 0.6755 to 0.6730. At the time of writing, the currency pair is trading as low as 0.6710.