Some good news coming in for the Australian economy after the nation reopened following another resurgence in COVID-19 infections a few weeks ago,
Some good news coming in for the Australian economy after the nation reopened following another resurgence in COVID-19 infections a few weeks ago, with its retail sales posting a strong rebound during the month of October. According to data released by the Australian Bureau of Statistics (ABS), Australia’s retail sales grew by 4.9% MoM, expanding at a faster pace than economists’ forecast for a 2.5% growth instead.
The spike was powered by an uptick in spending in clothing stores, which saw sales surge by nearly 28% in October, followed by department stores (22%) and restaurants (12%). The pace of growth seen in October was far higher than the 1.7% growth registered in retail sales through the month of September.
Economists remain extremely optimistic that consumer spending levels could continue to rise and support Australia’s economic growth in the coming months. One of the key factors for the upbeat forecast is that Australia enjoys high levels of household savings as well, despite the COVID-19 pandemic, which could further bolster consumer confidence to make discretionary spends.
Retail sales could also tick higher in the near future as Australia enjoys one of the highest national vaccination rates worldwide, upwards of 86%. The widespread rollout of COVID-19 vaccines and booster shots among the population have helped the government ease restrictions in the populous regions and key markets of Sydney and Melbourne, giving consumers more reason to cheer and splurge.
Household consumption contributes to around 55% of Australia’s GDP and was hit hard during the lockdowns imposed in Q3 2021 to combat the spread of the Delta variant of the coronavirus. Economists expect next week’s GDP report release to show a contraction of around 3% in Australia’s economy between July and September, driven lower by reduced consumer spending. However, some of the contraction could be limited by strong exports out of the nation during the period.
Impact on the AUD
Despite the stronger than expected retail sales report, the AUD exhibits signs of bearishness early on Friday. The risk-sensitive currency is being weighed down by the market sentiment which has turned risk-off amid the resurgence in COVID-19 cases, particularly in Europe, which has dimmed the outlook for global economic recovery.
AUD/USD
This sentiment has driven investors away from the commodity currency and towards safe haven instruments and currencies instead. At the time of writing, AUD/USD is trading at around $0.
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