Retail sales disappoint

But lends a hand to further rate cuts this year

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published September 3, 2013 1:01 pm AEST

Judging by today's retail sales data, Australia's economic growth is still subdued.

Retail spending rose just 0.1% in July, according to the Australian Bureau of Statistics (ABS), much less than the 0.4% economists had been expecting. This follows a flat June, and a similar rise of 0.1% in May.

Department store sales, including the likes of David Jones (ASX:DJS) and Myer Holdings (ASX:MYR) dropped 1.3%, with other retailing sliding 0.3%. Cafes, restaurants and takeaway food services rose 0.2%, clothing, footwear and personal accessory retailing gained 0.3%, while household goods retailing saw a 0.1% increase in July.

On a month-by-month basis, department stores sales dropped 7.9%, which would be hugely concerning for David Jones and Myer – and their shareholders. But it seems that not all retailers are suffering the same fate.

Harvey Norman (ASX:HVN) reported last week that home appliances, bedding and furniture categories continued to show good growth, with sales from the franchised Australian operations recording a 5.3% increase in sales in July, compared to July 2012. Likewise, JB Hi-Fi Limited (ASX:JBH) saw sales growth of 8% in July 2013, which is fairly impressive given the impact the Olympics in 2012 had on sales.

The weak retail data is unlikely to sway the Reserve Bank to cut rates later today, having cut the official cash rate by 0.25% last month. The central bank will likely be waiting to see more economic data before cutting rates much further, with gross domestic product data to be released on Wednesday, as well as other economic indicators.

Foolish takeaway

The falling Australian dollar was meant to give our retailers a shot in the arm, mainly by persuading consumers to shop locally rather than having to pay more than 10% extra because of the falling exchange rate. That could mean at least one more interest rate cuts is on the cards before Christmas.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned.

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