Retail sales unexpectedly fell in February - the most in a year - while building approvals also came in weaker than tipped for the month, suggesting the economy may have less momentum than pundits thought.
Retail sales dropped by 1.4 per cent in February, seasonally adjusted, reversing a revised 1.1 per cent rise in January, Australian Bureau of Statistics data show. For the month, they totaled $19.8 billion.
Three official rates rises by the Reserve Bank in the final months of 2009 - topped up by commercial banks - slapped borrowers with higher credit costs. Economists had expected retail spending to edge up 0.3 per cent for the month.
Ahead of today's slew of economic figures, financial markets had been betting on a three-in-four chance that the Reserve Bank would lift rates for a fifth time since October when its board meets next week. That wager eased after today's readings - dropping to a two-in-three chance - as investors also digested the weak numbers on building approvals.
Building approvals fell by 3.3 per cent in February, following a revised 5.5 per cent slide in January, the ABS said. Economists estimated approvals would post a 2.1 per cent increase.
Lacklustre approvals in construction complicate the RBA’s battle against an overheated economy by slowing the expansion of the nation’s housing stock. A chronic shortage of housing is one of the reasons home prices have increased by 1 per cent a month over the past year.
The RBA has flagged strongly rising home price as a reason for its rate rise this month.
''Building approvals appear to be plateauing in the first half of 2010 after rising 30 per cent in the past year,'' said Macquarie senior economist Brian Redican. Such an easing of expansion is what the RBA intends from its interest rises, he said.
(Edited. Source: Theage.com.au)
