Australia on the up as spending and exports rise
Retail sales surge in January amid a brighter economic outlook, while the trade surplus swells
Australian retail sales surged by the most in almost a year in January and exports jumped to record highs, clear evidence the resource-rich economy is stepping up a gear even as a boom in mining investment cools.
Figures released yesterday by the Australian Bureau of Statistics were packed with milestones. A 1.2 per cent rise in retail sales blew away forecasts of a 0.5 per cent gain, and lifted annual sales growth to 6.2 per cent, the highest since late 2009.
Likewise the country's A$1.4 billion (HK$9.8 billion) trade surplus was the largest in almost three years as exports climbed 3.7 per cent and dwarfed analyst estimates of A$400 million.
"People are choosing to spend more, borrow more and save less, and that's all to the good," said Michael Blythe, chief economist at Commonwealth Bank of Australia. "That's a key transmission mechanism of monetary policy and it shows the stimulus is working. The next move in rates is now likely to be up, albeit not until late this year."
The upbeat news strongly supported the Reserve Bank of Australia's (RBA) decision last month to take another rate cut off the table.
The revival in retail spending was especially important as the A$270 billion retail sector accounts for 17 per cent of Australia's A$1.5 trillion in annual gross domestic product and is the second-biggest employer after the health industry, with 10 per cent of all jobs.
The increase in sales in January was broad-based, with gains of 2 per cent for eating out, 1.1 per cent for clothing and 1.5 per cent for households goods. Even long-struggling department stores saw sales climb 2.6 per cent.
Indeed, it was a revival in consumption and a sustained surge in resource exports that lifted Australia's economic growth to a stronger than expected 2.8 per cent in the final quarter of last year, the fastest pace in a year.
Exports continued their stellar run in January to hit a record A$29.8 billion, with farm goods up 5 per cent and metal ores such as iron ore rising 3 per cent. Export growth for the year to January accelerated to 20 per cent, the fastest in almost three years, as the hundreds of billions spent on mining projects turns into actual output.
Net exports added 0.5 percentage points to GDP last quarter, and no less than 2.4 percentage points for all of last year.