Slower Domestic Demand Pushes Australian Retail Sales to Drop 0.2% in April 2008

A sharp drop in retail sales figures for April 2008 masks what economists consider is a flat result for the month.

Australian retail sales fell in April 2008, adding to evidence of slowing the nation's 17 years of economic expansion.

Sales fell 0.2 percent from March, when they climbed a revised 0.2 percent, the Bureau of Statistics said in Sydney today. The median estimate of 22 economists surveyed by Bloomberg News was for a 0.2 percent gain, reports Bloomberg.

Skyrocketing gasoline prices and a rise in borrowing cost by the central bank is the main reason behind the fall in the retail sales. Slowing economy along with higher borrowing cost tide the customer hands for further spending. Hence less domestic demand is creating the pressure on the retail sales industry and forcing its sales to drop down.

Also inflated food prices made the damage to the retail sales with decreasing spending on retail food products. The Australian turnover of retail sales decreased due to decline in sales by chain and large retailers. The sales decline for small retailers is expected to be marginal. At the same time decline in spending on the recreational goods made the retails sales to decline further.

"If we exclude the Easter effect, we can see that ex-food retail sales over the last two months have been flat," ANZ economist Katie Dean wrote in a note to clients. "This confirms the economy is slowing and should put the RBA out of the game. The big uncertainty is whether this slowdown will continue when the July tax cuts arrive," she adds, reports The Age.

According to research analyst at Arth Business Research, “ This decline in retail sales is expected to improve in coming months as the Australian government is expect to cut the income taxes which would increase the income of the wage earners marginally. Also some expected relief from RBA would help the retail sales to regain the ground.”