Retail weakness bolsters rate cut call: NAB

NAB economists are forecasting a sharp drop in the official retail trade data for April.

Pedestrians walk past a women's fashion store in Pitt Street Mall in Sydney. Picture: AAP

NAB economists have forecast a sharp fall in the official retail trade numbers for the month of April, bolstering their prediction for two rate cuts this year.

NAB said it expects the Australian Bureau of Statistics data to reveal a 0.5 per cent drop in retail sales for April, compared to March.

It also predicted ABS retail growth figures for March to be at zero, lower than the 0.3 per cent estimate already released by the ABS.

“This is clearly a very weak result, which further underlines our broader concerns about the Australian economy,” said NAB group chief economist Alan Oster.

“Other NAB data also show weakness, notably the April NAB Monthly Business Survey, which showed that the bounce in conditions in March was short-lived, as we expected.

“While trading and profitability have previously dipped below average, April is the first time the employment index has shown signs of weakness.

“While employment has previously held up better — similar to official data — the impact of slowing activity and a weak outlook may now be flowing through to the labour market.

“This does not bode well for consumer sentiment or retail sales.”

The bank said that with forecasts were below trend growth and target inflation, it predicts two rate cuts this year in 2019, taking the cash rate to a new record low of 1 per cent.

Still, NAB’s cashless retail sales index improved 1.2 per cent in April compared to a 0.5 per cent fall in March on a month on month basis, which could because of the timing of Easter and ANZAC day affecting the seasonal adjustment process.

Minutes from the Reserve Bank’s latest meeting released yesterday revealed that members believed a deterioration in the job market would warrant a consideration of a reduction in the cash rate.

The official data for April showed the unemployment rate rose 5.2 per cent, up from 4.9 per cent in February.