Australian Retail Sales Beat Forecasts Despite Elevated Inflation

It is a relatively busy morning on the Australian economic calendar. Following the surprise 25-basis point RBA interest rate hike, Australian retail sales figures drew interest this morning.

According to prelim figures, retail sales increased by 0.4% in March versus a forecasted 0.3% increase. In February, retail sales rose by 0.2%.

According to the ABS,

• Food retailing rose by 1.0%, with cafés, restaurants, and takeaway services seeing a 1.5% increase in spending.
• However, spending on clothing, footwear, and personal accessory retailing fell by 1.0%, with spending on household goods tailing falling by 0.4%.
• There was also a 0.2% decline in department store sales.
• Compared with March 2022, retail sales rose by 5.4%.

The numbers will concern the RBA and support further policy moves should inflation fail to soften significantly. The pickup in spending would support inflation at current levels.

AUD/USD Reaction to Australian Retail Sales

Before the retail sales figures, the AUD/USD rose to a high of $0.66734 before falling to a pre-stat low of $0.66553.

However, in response to the retail sales figures, the AUD/USD fell to a post-stat low of $0.66639 before rising to a high of 0.66715.

This morning, the AUD/USD was up 0.13% to $0.66709.

Next Up

Looking ahead to the US session, it is a busy day on the US economic calendar. The US ADP nonfarm employment change and the all-important ISM Non-Manufacturing PMI will be in focus.

While the markets will consider the stats, the Fed will be the focal point. Investors expect a 25-basis point Fed interest rate hike. However, there is a high degree of uncertainty on whether the Fed will aim to deliver another 25-basis point hike in June.

After the latest Core PCE Price Index numbers, today’s stats could influence the decision.

Economists forecast the ADP to report a 150k increase in nonfarm payrolls and for the ISM Non-Manufacturing PMI to rise from 51.2 to 51.8.