Josh Gilbert, market analyst at eToro, shares his three things to watch in Australia in the coming days.
1. AU retail sales
On Tuesday, the latest retail sales figure will be delivered. As always, retail sales is a key data point on the RBA’s list and often provides valuable foresight for the direction of interest rates. A resilient consumer this year has seen spending hold up well, despite consumer surveys telling us that households are increasingly pessimistic.
With retail spending still high, the fear is that this will continue to feed inflation, the very challenge the RBA is trying to combat. If households continue to splash cash, it gives the RBA headroom to hike rates further should they feel necessary.
With RBA Governor Michele Bullock maintaining a relatively wary tone in her most recent address, a buoyant set of retail figures on Tuesday could mean a further hawkish tone from the RBA.
However, next week’s figures may show the signs of a spending slowdown, with a contraction of 0.3% expected. This will be a step in the right direction and good news locally.
Retail sales numbers may be skewed in the months ahead with seasonal spending, but a contraction next week would be well welcomed by investors.
2. AU monthly CPI
After Michele Bullock’s aforementioned hawkish tone throughout the week, it's fitting that on Wednesday, the monthly CPI reading is released. The RBA Governor expressed her concerns this week that the inflation challenge is “increasingly homegrown and demand-driven”, showing there is still work to do locally.
It’s worth noting that, whilst other Central Banks are ending their tightening cycles, Australia seems far from a conclusion. The key for other nations has been higher interest rates.
The BOE sits at 5.25%, and the Fed sits at 5.25-5.5%, both just under 100bps higher than the RBA’s cash rate. Clearly, the board feels there is more work to be done on inflation – and that could, therefore, mean the cash rate has higher to go.
The good news is that the CPI indicator is expected to ease next week to 5.3% from 5.6% in September. This is a welcome prediction for many, given other deciding factors, such as unemployment and retail sales, remain stubborn.
3. Black Friday and Cyber Monday
Originally an American tradition, Black Friday sales have well and truly ingrained themselves in the Australian calendar. Today’s deals are more than a one-day event, however, with the more e-commerce-focused Cyber Monday bookending this weekend and plenty of retailers extending their deals into next week to drive as much pre-Christmas foot traffic as possible.
According to retail groups, the annual sales event is set to eclipse the once-unbeatable Boxing Day sales phenomenon. With consumer habits now well and truly adjusted to go all-in on a late November splurge, retailers now see little choice but to participate or risk missing out on one of the biggest consumer events of the year.
While the true impact won’t show up in next week’s retail sales figures, December results will likely indicate a jump in spending over November, something that may well be a key factor in driving ongoing rate rises into the new year.