Retail trade fall signals rate cut

THE second successive quarterly fall in Australian retail sales could bring forward an interest rate cut, economists say.

THE second successive quarterly fall in Australian retail sales could bring forward an interest rate cut, economists say.

Australian retail trade at current prices fell 1.0 per cent in June to a seasonally adjusted $20.037 billion from a downwardly revised $20.232 billion in May, figures from the Australian Bureau of Statistics (ABS) show.

This is the fourth month in 2008 where retail sales have been weak.

Retail sales fell 0.6 per cent in the June quarter, following a 0.1 per cent fall in the three months to March.

TD Securities senior strategist Joshua Williamson said the "recession" levels of retail sales in Australia could bring forward an interest rate cut in 2008.

"Consumers are really putting their wallets away and thinking of increasing living costs and higher interest rates," he said.

"It suggests retail sales are in recession and the Reserve Bank could cut rates sooner than we expected.

"It's higher interest rates from the major banks, higher costs of living, it's the credit squeeze ... it's the uncertainty in household wealth and falling share markets which are making people stay away from the shops."

TD Securities expects official interest rates to be cut in December, but Mr Williamson said the weak retail sales figures could increase the chance of a rate cut before then.