01/12/2011 - 09:08

Data shows WA leading retail revival

01/12/2011 - 09:08

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Data shows WA leading retail revival

Western Australia's retail sector recorded the highest growth in the nation in October, further evidence of the two-speed national economy, economists say.

Retail spending rose by a modest 0.2 per cent in October nationally, which was lower than market expectations, according to official figures.

In WA, retail spending was up by 0.7 per cent, the Australian Bureau of Statistics said.

The data is further evidence of the two-speed economy, ANZ senior economist Julie Toth said.

"We're seeing a little bit of that two speed story - stronger in WA, less so in New South Wales and Queensland."

Meanwhile, Australian residential building approvals fell 10.7 per cent to 10,484 units in October, seasonally adjusted.

This compares to a downwardly revised 11,889 units in September.

In the year to October, building approvals were down 29.8 per cent, the Australian Bureau of Statistics (ABS) said.

Economists' forecasts had centred on a 3.3 per cent rise in approvals for October.

ICAP senior economist Adam Carr said the building approval data indicated a weakening housing sector.

"We've seen private housing off 7.5 per cent and approvals for apartments down almost 17 per cent after a huge fall in September, so this doesn't bode well for housing and construction going forward," he said.

"The flip side is it could lend support to house prices.

"The retail figures were okay - they were barely positive, but its the fourth consecutive month of increase, so it's not a negative story but its not a fantastic number.

"Overall sales are doing okay, but it's the approvals that are the real worry."

Mr Carr said the building data in particular pointed to nervous consumer sentiment which was feeding from global economic uncertainties.

"I think confidence is shot - in October, we started to see a serial deterioration in Europe, and I think that's weighed on sentiment," he said.

"The broad trend in retail trading is that we've seen a pick up, but this suggests that it's modest."

Mr Carr said the data would not be likely to have a strong influence on the Reserve Bank of Australia's cash-rate decision next week.

"I'm more concerned about the central banks' activity this week - it seems to indicate a case to ease," he said.

"The Aussie data by itself does not really support that case, although approvals were atrocious.

"At this point they are balanced by the capex figures and consumer spending."

Ms Toth said she did not believe the weaker than expected retail trade figures would weigh heavily on the RBA's board members when they decided whether or not to cut interest rates next week.

"It is very much a line ball decision for December, these data do indicate that the consumer side of the economy is still relatively weak," she said.

"I don't think these data would have major implications for the RBA."

She said the figures showed retail growth was strongest in the food sector while non-food retailers, especially department stores, were continuing to struggle.

"Food retailers saw a 0.5 per cent month on month growth compared to just 0.1 per cent for non-food retailers."

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