Australian retail sales rebound strongly in October, beating expectations
Good news is arriving for the Australian economy after the country reopened following a new resurgence in COVID-19 infections a few weeks ago, with its retail sales rebounding strongly during the month of October. According to data released by the Australian Bureau of Statistics (ABS), Australian retail sales grew 4.9% MoM, growing at a faster pace than economists expected to grow 2.5% at the square.
The spike was fueled by an increase in spending at clothing stores, which saw sales rise nearly 28% in October, followed by department stores (22%) and restaurants (12%). The pace of growth observed in October was well above the 1.7% growth recorded in retail sales in September.
Economists remain extremely optimistic that levels of consumer spending could continue to rise and support Australia’s economic growth in the months to come. A key factor in the optimistic forecast is that Australia also benefits from a high level of household savings, despite the COVID-19 pandemic, which could further boost consumer confidence to make discretionary spending.
Retail sales could also increase in the near future, as Australia enjoys one of the highest national vaccination rates in the world, reaching 86%. The widespread rollout of COVID-19 vaccines and booster shots among the population has helped the government ease restrictions in populated areas and key markets in Sydney and Melbourne, giving consumers more reason to celebrate and make follies.
Household consumption contributes around 55% of Australia’s GDP and has been hit hard during lockdowns imposed in the third quarter of 2021 to combat the spread of the Delta variant of the coronavirus. Economists expect the release of next week’s GDP report to show a contraction of around 3% in Australia’s economy between July and September, driven by lower consumer spending. However, part of the contraction could be limited by strong exports out of the country during the period.
Impact on AUD
Despite the stronger than expected retail sales report, the AUD shows signs of falling on Friday morning. The risk-sensitive currency is weighed down by market sentiment which has reduced risk amid the resurgence of COVID-19 cases, particularly in Europe, which has clouded the outlook for a global economic recovery.
AUD / USD
This sentiment has prompted investors to move away from commodity currencies and instead turn to safe haven instruments and currencies. At the time of writing, AUD / USD is trading at around $ 0.