Australia's Retail Sales Stall In July, Defying Economists' Predictions of Growth

Contrary to forecasts by economists of a 0.3% rise in July, the retail trade figure remained static at 0% for the year after upbeat results in May and June, according to the latest data by Australian Bureau of Statistics.

While June saw a rise of 0.5%, retail sales were unchanged during July, as spending on department stores and on clothes were down by 0.6% and 0.5%. And, sales at food joints dropped to 0.2%, reported Reuters.

However, supermarket chains reported a rise of 0.2% in sales, as Australia's biggest grocers Coles and Woolworths posted high annual profits.

"Overall, it's clear there was little momentum behind consumer spending at the start of the quarter. And while it is early days, the data broadly reinforce our view that Australian households are not rushing to spend their newfound tax cuts," said Abhijit Surya, Australia and New Zealand economist at Capital Economics.

But, policymakers pointed out that consumer sales may increase as an average wage earner saves an extra AU$1,500 a year after the tax cuts introduced by the government in July.

However, retailers expected grim sales during Christmas, as Australians struggled with high cost of living and interest rates, according to News.com.

National Retail Association interim chief executive Lindsay Carroll said Friday's trade figures did not look good, given Australia's strong population growth. She warned that frugal spending may extend to the busiest retail season of the year.

"The industry is at the mercy of consumer sentiment; that's just the nature of retail. We need policymakers to loosen the reins somewhere or we're in for a tough Christmas trading period," Carroll said.

Due to low consumer spending, it was unlikely the Reserve Bank of Australia (RBA) will lower the interest rates, Surya said. RBA had maintained the cash rate at 4.35% as inflation rate remained above the expected 2-3%.