Australian Retail Sales Surge Most in Eight Years

By Jacob Greber

Feb. 4 (Bloomberg) -- Australian retail sales rose in December by the most in more than eight years after the government handed out cash grants to families and pensioners and urged them to spend the money.

Retail sales, seasonally adjusted, increased 3.8 percent from November, when they advanced 0.4 percent, the Bureau of Statistics said in Sydney today. The median forecast of 16 economists surveyed by Bloomberg News was for a 1.4 percent gain.

Consumer spending is being stoked by government handouts and the central bank’s decision to cut borrowing costs yesterday to the lowest level in 45 years. Retail sales may gain in coming months after Treasurer Wayne Swan said the government will distribute another A$12.7 billion ($8.2 billion) to families from next month. A separate report shows home approvals fell.

“A strong surge in retail spending is likely the only thing that could have prevented the Australian economy from experiencing a sharp fall in the fourth quarter,” said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney.

The Australian dollar traded at 64.78 U.S. cents at 12:28 p.m. in Sydney from 64.94 cents before the report was released. The two-year government bond yield fell 2 basis points, or 0.02 percentage point, to 2.55 percent.

Shares of Harvey Norman Holdings Ltd., Australia’s biggest furniture and electronics retailer, rose 2.4 percent to A$2.15 in Sydney at 12:21 p.m. in Sydney. The benchmark S&P/ASX 200 stock index fell 0.7 percent to 3485.6.

Department Stores

Spending on household goods rose 9.9 percent in December while sales at department stores gained 8.3 percent, the report showed. Consumers also spent 5.8 percent more on clothing.

The surge in December spending was the biggest increase since August 2000, one month after the government introduced a goods and services tax.

Treasurer Swan distributed A$8.9 billion at the start of December to the elderly and families after retailers including David Jones Ltd., the nation’s second-biggest department store chain, reported waning sales.

Today’s retail sales report is “disappointing,” said Andrew Hanlan, a senior economist at Westpac Banking Corp. in Sydney.

“The government gave away all that money and it needed only a small portion of it to be spent to boost retail sales by 5 percent,” he said. “This result suggests the majority of the handout was saved or is going to be spent in the first quarter.”

Furniture, Electronics

David Jones said today that sales in the three months through Jan. 24 fell 6.6 percent to A$619.9 million from the same period a year earlier as consumers curbed spending on furniture, electronics and homewares.

Prior to December, retail sales gained by an average of 0.1 percent a month in 2008, according to the bureau’s trend series, down from 0.6 percent monthly growth in 2007.

The statistics bureau shifted its focus in July to trend retail sales after it cut the sample size of the survey by two thirds to reduce costs. The bureau reinstated the full seasonally adjusted survey for today’s report and didn’t include a trend figure for December because of the stimulus package.

Consumers cut spending during the first 11 months of last year amid speculation the economy faces its first recession since 1991, after expanding just 0.1 percent in the third quarter, the weakest pace in eight years.

Home-building approvals unexpectedly fell in December for a sixth month, matching the longest run of declines in more than four years, and sales of cars and trucks tumbled 18.5 percent in January compared with the same month a year earlier, separate reports showed today.

Reports published this year show the jobless rate rose to a two-year high of 4.5 percent in December as companies cut 43,900 full-time jobs, bank lending unexpectedly fell for the first time since 1992, manufacturing shrank in January for an eighth month and house prices dropped for a third straight quarter.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net