Interest rates on hold as sales run out of puff

INTEREST rates are tipped to remain on hold until at least August after weaker than expected retail sales fuelled economy concerns.

Retail sale

INTEREST rates are tipped to remain on hold until at least August after weaker than expected retail sales fuelled concerns about a likely contraction in the economy.

Retail turnover fell 0.5 per cent in March, according to official data released yesterday, following a rise of 0.8 per cent in February.

JP Morgan analyst Helen Kevans said the weak sales result gave the Reserve Bank more time to sit on present policy settings.

Retail sales slumped to a seasonally adjusted $20.46 billion in March from $20.55 billion in February, according to Australian Bureau of Statistics figures.

Economists had forecast the opposite -- a 0.5 per cent rise in turnover.

The ABS said the fall was driven by Queensland, where spending slumped 2.9 per cent, contrasting with Victoria, which jumped 0.9 per cent.

Western Australia, New South Wales, Tasmania and ACT recorded falls, while South Australia and the Northern Territory each posted growth of 0.3 per cent.

NAB chief economist Alan Oster said that while the month-to-month figures were poor, the inflation-adjusted quarterly retail result was far more alarming -- unchanged since a 0.4 per cent fall in the three months to December.

"Put that together with the fall in exports from flood-related delays to coal exports and you have almost certainly got negative GDP in the first quarter," Mr Oster said.

Ms Kevans said the weak sales data reinforced her expectation that a rate rise was unlikely before August.

The Australian dollar tumbled to US107.03c immediately after the sales data was out.

Shares in major retailers fell 1-2 per cent.