Economic growth in Australia remains subdued with retail spending still weak.
Official figures released on Tuesday show retail spending rose 0.1 per cent in July, well short of the 0.4 per cent rise economists were expecting.
The Reserve Bank of Australia, however, saw no need to adjust its economic settings and kept the official cash rate on hold at 2.5 per cent.
Spending in June was unchanged after rising just 0.2 per cent in May, the Australian Bureau of Statistics said.
RBC Capital Markets senior economist Su-Lin Ong said the likely below-trend pace of economic growth in the June quarter was continuing into the September quarter.
“We were particularly surprised by the weakness in retail sales,” she said.
“We had thought the school kids bonus would boost retail activity, but that was not the case.”
The ABS also released trade and international investment figures, which showed the current account deficit widened to $9.35 billion in the June quarter.
Ong said the international trade figures also were quite weak.
“A pretty weak set of numbers all around,” she said.
CommSec chief economist Craig James said consumer caution ahead of the federal election, along with a warm winter, had contributed to flat retail spending in June.
“We have to wait until the election is out of the road to see how the economy responds to low interest rates,” he said.
James said the international trade figures pointed to modest economic growth in the June quarter.
“The contribution of net exports to GDP in the June quarter was effectively zero, and then you’ve got government spending which is actually going to detract from GDP growth – it suggests a very modest outcome in terms of the economy for the quarter,” he said.
“It suggests that for the first time in a long time, we could see the US economy growing at a faster rate than Australia, which is just quite remarkable.
“The positive is that the trade sector is not restraining or detracting from economic growth in a big way but the other side of the equation, the bad news, is that exports are not adding to growth at the moment.”
