Weak retail data won't sway RBA: analysts

30 May 2012, 7:26 pm   -   Source: AAP
(AAP)

(AAP)

Weak retail trade data, released on Wednesday, is unlikely to convince Australia's central bank to cut interest rates, economists say.

Weaker than expected retail trade numbers are unlikely to persuade Australia's central bank to cut interest rates in June.

Data released by the Australian Bureau of Statistics on Wednesday showed retail sales fell by 0.2 per cent in April, below economists' expectations.

However, HSBC Australia chief economist Paul Bloxham said the retail data was offset by construction data which showed a 5.5 per cent lift in that sector, driven by mining investment, in the first three months of 2012.

"We know the retail sector has been one of the weaker parts of the economy and that continues to be the case in these numbers, but combine that with the investment numbers and there are still clear signs of multi-speed growth," he said.

Mr Bloxham said the data was unlikely to convince the Reserve Bank of Australia to cut the cash rate from its current level of 3.75 per cent at its meeting on Tuesday.

"Overall we think local conditions are unlikely to motivate the RBA to cut next week but of course the focus is all on global conditions at the moment."

RBC fixed income and currency strategist Michael Turner said it was a mixed result.

"Retail sales were quite soft, some of the details were pretty weak, discretionary spending was pretty soft in April," Mr Turner said.

The construction work done data was pretty firm mainly thanks to a big jump in investment that appears to be mining related."

The ABS reported that engineering work done rose 13.3 per cent in the March quarter and building work done fell 5.0 per cent.

"So if you take that out, then the non-mining sectors don't look particularly great, residential construction continues to contract and non-residential investment looks pretty soggy as well," Mr Turner said.

They were all themes that we were aware of."

Macquarie senior economist Brian Redican said seasonal factors seemed to have impacted the figures, explaining the rise in March compared to April's modest fall.

"It's ridiculous to think that retail sales were growing by 1.1 per cent in the previous month, and then completely collapsed in April," he said.

"I think if you average those two months, you get a better idea of what's happening there.

"In that respect, it's a continuation of what we saw in 2011, where sales were growing at a modest pace."

Mr Redican said that spending conservatism seen in 2011 was still an issue in early 2012.

"I think people are trying to rebuild their balance sheets, so they're very cautious about taking on more debt and spending - they're trying to repay their loans and increase their savings as fast as possible," he said.

Mr Redican believed strength in construction data showed a rebound in engineering activity, reflecting moves in the mining industry.

"This rebound is very important for our GDP (gross domestic product) forecast, which is dependent on a strong recovery in engineering," he said.

"There was a question about whether bad weather would affect it but it has come through."

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