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Cut in rates fails to lift retail sector

10 Jan 2013 SYDNEY MORNING HERALD - GLENDA KWEK ECONOMY


LOWER interest rates have failed to boost the struggling retail sector and November sales posted a surprise drop with lower consumer spending on non-food items.

Retail sales fell 0.1 per cent in November to a seasonally adjusted $21.5 billion, the Bureau of Statistics said in a report released on Wednesday, disappointing economists who had expected a 0.3 per cent rise.

"If the consumer is cheered by the interest rate cuts, she's still keeping it to herself," BT Financial Group chief economist Chris Caton said, adding that there was "no good news" in the data.

The dollar slipped more than a quarter of a cent to $US104.91, as financial markets' expectations of an Reserve Bank rate cut in February rose marginally from 36 to 38 per cent, Credit Suisse data showed.

AMP Capital senior economist Bob Cunneen said the November result was "disappointingly soft" and the Reserve Bank's interest rate cut in October had not had a positive impact on consumers' willingness to increase spending.

The release followed the Housing Industry Association's report on new home sales, which rose 4.7 per cent in November and was led by a 7.7 per cent growth in the sale of detached houses.

Spending on household goods fell 0.9 per cent. Consumers shelled out less for clothing, footwear and personal accessories and reduced their purchases in department stores.

Consumers were more willing to eat at cafes, restaurants and order takeaways, with the sector growing 0.3 per cent. Sub-sectors such as recreational goods, pharmaceuticals, cosmetics, toiletries, and newspapers and books also rose slightly.

"With the December interest rate cut starting to flow through, [retailers] should be a bit more positive that it should be a better year," Mr Cunneen said.

The Australian National Retailers Association (ANRA), pushing for a lower GST online threshold, said the soft figures reflected consumers' international online shopping ahead of the Christmas season. "Retailers anticipated losing about 8 per cent of sales to overseas competitors in the lead-up to Christmas 2012," chief executive Margy Osmond said.