November 2009 retail sales surged at the fastest pace since economic stimulus was enacted in early 2009. This development would strengthen the possibility of another home loans interest rate hike by the Reserve Bank of Australia on their next policy meeting in February.
As the Australian dollar went up by a U.S half cent to US$0.9241 and bonds weakened, there is a 56% probability of a rate hike next month. This rate is higher than the 50% at the start of the week.
The Australian Bureau of Statistics also reported that retail sales went up by 1.4% to A$20.08 billion from A$19.80 billion in October. Australia’s trade balance also narrowed as the drop in imports offset the exports downfall. This balance on goods and services narrowed to A$1.70 billion in November from October’s A$2.08 billion deficit.
Department store sales and household goods went up 1.1% and 1.7% respectively. These data are backed up by strong consumer confidence survey and retail reports. This upswing came despite consecutive interest rate increases in October and November.
This would also strengthen the claim of some policy makers that the economy is recovering and that an interest rate hike is very likely to happen.
JP Morgan economist Helen Kevans said that these are surprising developments because they were expecting a drop due to the huge discounts given after Christmas. Millan Mulraine, economic strategist at TD Securities also added that this is proof that there is stronger consumer spending that is triggered by current interest rates and government spending stimulus.
