Why retail sales make Oxford Economics see RBA rate rise on the horizon

As the RBA gears up to decide whether or not to raise interest rates again on Tuesday, December 5, the Australian Bureau of Statistics has released retail sales data for October.

At face value, the data looks like it could add weight to the case for an RBA pause: retail sales in October fell 0.2 per cent, following a rise of 0.9 per cent in September.

Good news, right? The consumer is thinking about our nation and deciding to leave some big purchases alone for a little moment.

Well, not exactly. Black Friday sales may have been a bigger lure – implying that retail sales could sharply rise in the next data release we get.

There’s also the consideration that on a year-on-year (YoY) basis, October’s retail sales were up 1.2 per cent.

Spending fell across all categories, except for food retailing.

Black Friday upside surprise

“It looks like consumers hit the pause button on some discretionary spending in October, likely waiting to take advantage of discounts during Black Friday sales events in November,” ABS Retail Statistics chief Ben Dorber said.

Mr Dorber is apparently all but expecting this to occur.

“This is a pattern we have seen develop in recent years as Black Friday sales grow in popularity.”

More rises likely: Oxford Economics

Oxford Economics Macroeconomic Forecasting chief Sean Langcake isn’t convinced that a 0.2 per cent fall in sales for October, regardless of Black Friday, is enough to turn the RBA dovish.

Only this week, RBA Governor Michele Bullock asserted Australia’s homegrown inflation is internally driven – in other words, global supply chains are less easy to blame.

“These data align with the narrative of fading consumer momentum … [but] they have little bearing on the RBA’s current struggle to rein in core inflation,” Mr Langcake said.

“We still expect to see another increase in rates in the coming months.”

The RBA most recently upped the cash rate to 4.35 per cent.

Australian CPI data drops tomorrow.