Originally published by AMP Capital
- Australian retail sales rose a stronger than expected 0.6% in February, which saw annual growth push up to 3%yoy.
The strength in February was driven by household goods, clothing and department stores. The latter may be just a bounce after months of weakness and increased discounting may have played a role.
The February bounce also follows a couple of weak months. With wages growth remaining weak and the positive wealth effect from rising property prices now giving way to a negative wealth effect from falling property prices in Sydney and Melbourne it’s likely that underlying retail sales growth will remain soft for some time to come.
- Dwelling building approvals fell 6.2% in February.
However, this was largely expected and reflected a 14.8%mom decline in volatile unit approvals after they rose 43.5%mom in January. More stable house approvals rose 2.3%mom and the underlying trend in total approvals is flat.
While approvals are running down from their 2015 highs, the level of approvals remains high historically suggesting no sharp collapse in dwelling construction activity on the horizon. In fact solidly rising approvals for alterations and additions suggest that total dwelling construction activity may actually grow a bit over the year ahead.
Today’s retail sales and building approvals data do not alter the outlook for interest rates where we continue to see the RBA remaining on hold into 2019.