Retail sales add pressure on RBA to cut rates

Retail sales fell across the first quarter to put more pressure on the RBA to cut interest rates.

Shoppers in Sydney. Pic: AAP

Australian retail sales were stronger than expected in March, but fell across the first quarter to heap more pressure on the Reserve Bank of Australia to cut interest rates.

Retail sales rose by 0.3 per cent in March, but fell by 0.1 per cent in the first quarter, the Australian Bureau of Statistics said. Economists expected a 0.2 per cent over the month and a 0.3 per cent increase for the quarter.

Clothing and footwear sales combined with stronger demand in cafes to lead retail sales higher in March. However, a big fall in sales in department stores partially offset those gains--the third significant monthly drop for that segment in four months.

Consumers are under rising pressure as household debt soars and as house prices fall, eroding wealth. Dwelling prices have been falling since 2017 and the retreat is widely expected to last into 2020.

Retail spending has slowed, dragging down GDP growth in the second half of last year and bringing the Reserve Bank of Australia closer to cutting interest rates for the first time since August 2016.

Economists expect the RBA either to cut interest rates at its policy meeting later today or to signal cuts are imminent.

With both economic growth and inflation falling, the case for lower interest rates has evolved quickly this year. Financial markets have priced in two cuts before the end of the year.

An interest-rate cut would see the official cash rate fall to a record low of 1.25 per cent from 1.50 per cent.

Dow Jones Newswires