Strong data increases rate hike chance

RETAIL trade and building approvals figures "blitz expectations", making a rate hike "all but certain" before 2011.

STRONGER than expected retail trade and building approvals figures have "blitzed expectations" and make a rate hike by the end of the year all but certain, economists say.

ICAP economist Adam Carr described the higher than expected figures, released by the Australia Bureau of Statistics at 11.30am (AEST), as "fantastic data".

"It's very bullish data for Australia and I think that talking of a slowing Australian economy is absurdly overdone," Mr Carr said.

"Today's data shows that GDP is looking like it is going to be very strong as well and certainly retail sales are picking up and approvals are picking up. It's just blitzed everyone's expectations."

Australian retail trade at current prices rose 0.7 per cent in July to a seasonally adjusted $20.4 billion, from an upwardly revised $20.250 billion in June, the Australian Bureau of Statistics (ABS) said.

The median market forecast was for retail sales to have risen by 0.4 per cent in the month.

Australian building approvals rose 2.3 per cent to 13,732 units in July, seasonally adjusted, from an upwardly revised 13,425 units in June, the Australian Bureau of Statistics (ABS) said.

In the year to July, building approvals were up 11.0 per cent.

The market forecast was for a fall of 0.7 per cent in June.

Mr Carr said the data painted a "really good picture" of the Australian economy.

"Certainly there is very little chance the RBA's going to be sitting on their hands til the end of the year," he said.

"I'd maintain they'd be hiking at least one more time this year, if not two."

He said the strong data definitely pushed up expectations of a rate hike.

"I think a rate hike this year is all but certain and next year it's likely," Mr Carr said.

The dollar jumped to above 89.50 US cents from 89.31 just before the data was released before settling back to be at 89.34 cents at 11.56am (AEST).