Australian economy not as strong as expected: economists

13:38, November 04, 2010      

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Australian retail trade at current prices rose 0.3 percent in September to 20.51 billion AU dollars ( 20.59 billion U.S. dollars), from 20.46 billion (20.54 billion U.S. dollars) in August, the Australian Bureau of Statistics (ABS) said on Thursday.

Australian economists say a weaker than expected retail sales result suggests the economy is not as strong as first thought as consumers are still cautious with their spending.

Over the September quarter, retail sales rose by 0.7 percent to 60.16 billion AU dollars (60.40 billion U.S. dollars), the ABS said.

The median market forecast was for retail sales to have risen by 0.5 percent in the month and 1.0 percent in the quarter.

Australia's financial services company CommSec chief economist Craig James said slumping building approvals figures released on Wednesday and weak retail spending were factors which would be on the mind of Reserve Bank of Australia (RBA) board members in December.

"It suggests that the economy is not as robust as what the Reserve Bank feels and it clearly has to reduce future expectations for rate hikes in 2011," James said.

He said consumers would continue to look for bargains in the lead up to Christmas.

Consumers were clearly looking at their budgets very closely, as utilities costs rise along with interest rates, he said.

However, he said the strong Australian dollar was pushing down the price of imported goods and online competition meant consumers had greater choice of where to shop.

Royal Bank of Canada (RBC) Capital Markets fixed interest strategist Su-Lin Ong said the results were softer than the market expectations.

"Consumers generally are continuing to spend but possibly not at the pace they were a few months ago, but the external sector remains healthy, underpinned by a stronger China and Asia," she said.



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