A shock 2% fall in retail sales has all but confirmed that the Australian economy is in recession.
According to data released by the Australian Bureau of Statistics, retail sales fell by 2% in February seasonally adjusted. In volume terms, retail trade fell to $18.87 billion in February from $19.26 billion in January.
Most economists had expected a fall of 0.5%. It is the biggest fall in retail sales in nine years.
Department store sales were hardest hit, plunging 9.8%, while clothing and soft good retailing fell 2.7%. Household good retailing dropped 3.8%. Sales for cafes, restaurants and takeaway food services fell 1.3% and food retailing fell 0.4%.
Every state and territory except Tasmania experienced a drop in retail sales. Western Australia had the biggest fall of 2.7%, followed by NSW with a drop of 2.4%.
Stephen Robert, economist with Nomura, described the data as “weak” and told Reuters that the affect of the Federal Government’s $10.4 billion stimulus package in December 2008 seems to be over.
“It shows the impact of the fiscal stimulus was pretty short-lived. I see a reasonable chance of a 50 basis point interest rate cut in April.”
St George chief economist Besa Deda agrees and is tipping the RBA will cut rates by 25 basis points when it meets next week.
The one positive was an upwards revision to the January retail sales figures, which now show a 0.5% increase, following a 3.8% increase in December following the Government’s stimulus package.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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