- Australian Retail Sales Missed Estimates
For the first time in four months Australian retail sales have missed expectations, a disappointing outcome given strength in other spending and sentiment indicators.
According to the ABS, sales rose by 0.2% to $25.665 billion in November in seasonally adjusted terms, just half the rate that had been expected by economists.
It was also a noticeable step down from the 0.6% and 0.5% increases registered in the prior two months.
As a result of the weak November result, the annual pace of sales slowed to 3.3%, down from the 3.5% level reported in October.
It now sits at the weakest level seen since August last year.
By category, sales of food (0.4%), clothing, footwear and personal accessories (1.7%) and household goods (0.2%) all increased, offsetting declines at cafes, restaurants and takeaway food services (-0.8%), department stores (-0.3%) and other goods (-0.1%).
Over the past year, sales of clothing, footwear and personal accessories recorded the fastest pace of growth all categories at 5.8%, edging out sales at cafes, restaurants and takeaway food services which increased by 5%.
Food retailing — the largest component of retail sales by dollar spend — increased by 3.1% to $10.312 billion.
Department store sales — at -3.2% — was the only category to record a decline in sales from the levels of a year earlier.
By state and territory, it was the most populous states that outperformed — New South Wales and Victoria — recording solid gains of 0.5% and 0.5% respectively.
Elsewhere sales grew by 0.3% in the Northern Territory and 0.1% apiece in Queensland and Tasmania, helping to offset declines of 0.6%, 0.4% and 0.1% in Western Australia, South Australia and the ACT.
Mirroring the monthly performance, Australia’s eastern states and territories recorded the strongest growth in sales over the past year.
Despite falling modestly in November, sales in the ACT grew by 6.4% from November 2015, the fastest pace reported across the nation.
At 4.3%, 3.5% and 3.7%% respectively, sales in New South Wales, Victoria and Queensland also outperformed, a sign that higher house prices and reasonable labour market conditions continues to support household spending.
At the other end of the spectrum, sales in Western Australia fell by 0.5% over the past year, indicating that weak labour market conditions as a result of the mining infrastructure downturn continue to weigh on spending.
At 0.3% and 2.8%, sales in Northern Territory and South Australia — highly exposed to the fortunes of the mining industry — were also below the national average.
Despite recording modest growth, the November retail sales report is a disappointment, particularly given strength in other household-specific indicators over the same period.
According to data released by the National Australia Bank on Monday, online retail sales grew by a solid 1.1% over the same period.
That followed a report from the Commonwealth Bank of Australia which revealed that economy-wide spending — including on services — grew at the fastest pace seen since the global financial crisis in November.
The ABS report offsets any optimism that was generated by those reports, casting doubt as to whether household spending — the largest component within the Australian economy — is picking up.
However, not all is lost.
Excluding the today’s report, sales growth has been robust in recent months, suggesting that the weakness seen in November may have been partially as a result of statistical payback.
Consumer confidence also remains elevated, particularly for current family finances, which is a promising sign given it has a tendency to act as a lead indicator on household spending.
Looking ahead, markets will be paying close attention to the December retail sales report, especially as it includes quarterly retail sales volumes which feeds into Australian GDP.
It declined unexpectedly in the September quarter, contributing to the large quarterly contraction reported in Australia’s national accounts.
The market reaction has been modest to the November retail sales report with the Australian dollar and ASX 200 both weakening on the result.
Australian bond futures have also strengthened, indicating that yields have fallen.
Gold Gained Ahead of Joe Biden Inauguration 2021
Gold price rose from one and a half month low on Tuesday ahead of President-elect Joe Biden’s inauguration on Wednesday.
The precious metal, largely regarded as a haven asset by investors, edged up by 0.2 percent to $1,844.52 per ounce on Tuesday, up from $1,802.61 on Monday.
He said, “The key factor appears to be the (U.S.) currency.”
As expected, a change in administration comes with the change in economic policies, especially taking into consideration the peculiarities of the present situation. In fact, even though Biden, Janet Yellen and the rest of the new cabinet are expected to go all out on additional stimulus with the support of Democrats controlled Houses, economic uncertainties with rising COVID-19 cases and slow vaccine distribution remained a huge concern.
Also, the effectiveness of the vaccines can not be ascertained until wider rollout.
Still, which policy would be halted or sustained by the incoming administration remained a concern that has forced many investors to once again flee other assets for Gold ahead of tomorrow’s inauguration.
Crude Oil Holds Steady Above $55 Per Barrel on Tuesday
Brent Crude oil, against which Nigerian crude oil is priced, rose from $54.46 per barrel on Monday to $55.27 per barrel as of 9:03 am Nigerian time on Tuesday.
Last week, Brent crude oil rose to 11 months high of $57.38 per barrel before pulling back on rising COVID-19 cases and lockdowns in key global economies like the United Kingdom, Euro-Area, China, etc.
While OPEC has left 2021 oil demand unchanged and President-elect Joe Biden has announced a $1.9 trillion stimulus package, experts are saying the rising number of new cases of COVID-19 amid poor vaccine distribution could drag on growth and demand for oil in 2021.
On Friday, Dan Yergin, vice-chairman at IHS Markit, said in addition to the stimulus package “There are two other things that are going with it … one is of course, vaccinations — in the sense that eventually this crisis is going to end, and maybe by the spring, lockdowns will be over.”
“The other thing is what Saudi Arabia did. This is the third time Saudi Arabia has made a sudden change in policy in less than a year, and this one was to announce (the) 1 million barrel a day cut — partly because they are worried about the impact of the surge in virus that’s occurring,” he said.
Also, the stimulus being injected into the United States economy could spur huge Shale production and disrupt OPEC and allies’ efforts at balancing the global oil market in 2021.
Crude Oil Pulled Back Despite Joe Biden Stimulus
Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.
Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.
On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.
OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”
“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”
Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.
“The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.
Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.
But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.
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