Retail Grows 4%
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Australia’s retail sales rebounded in December as stores slashed prices to attract Christmas shoppers and hot weather stoked spending on air conditioners.Australia’s retail sales rebounded in December as stores slashed prices to attract Christmas shoppers and hot weather stoked spending on air conditioners.

Retail sales rose 0.4 percent from November, when they fell 0.1 percent, the Australia Bureau of Statistics said in Sydney today. The median forecast of 20 economists surveyed by Bloomberg News was for a 0.5 percent increase.

Electronics retailers Harvey Norman Holdings Ltd. and Retravision Pty. say demand for air conditioners because of record temperatures in December boosted their sales. Australia’s retail sales recovery may not last as a renewed surge in fuel costs in 2006 has again left consumers with less to spend.

“Some retailers experienced a late surge in Christmas sales, with discounts attracting shoppers and fuel costs falling,” Brian Redican, senior economist at Macquarie Bank Ltd., the largest Australian investment bank, said in Sydney before the report was released. “Still, sales over the fourth quarter were more moderate and we expect subdued spending over the first half of 2006.”

Retail sales in the three months ended Dec. 31 adjusted to remove inflation gained 0.3 percent from the previous three months. Economists had forecast a 0.1 percent gain after sales climbed 0.4 percent in the third quarter.

Driving spending in December, Australia had its hottest year on record in 2005, with Queensland state recording the warmest December in 110 years, according to the Bureau of Meteorology.

`Excellent December’

Victoria state had a hotter than average December, while New South Wales had 11 days in December when the temperature was at least 30 degrees Celsius, matching a record set in 1957.

Harvey Norman, the nation’s largest electronics and furniture chain, increased second-quarter sales 10.7 percent to A$1.24 billion on demand for air conditioners and fans.

“We had an excellent December,” Chairman Gerry Harvey said in an interview. “We did extremely well with air conditioners because of the hot weather.”

Still, “rising petrol prices are again subduing activity and we saw that in the few months prior to Christmas,” he said.

Australian retail spending on household goods gained 1.8 percent in December from November and sales at supermarkets rose 0.3 percent, today’s report showed. Sales at clothing stores dropped 1.3 percent and sales at department stores fell 0.8 percent.

Fuel Costs

In December, “our sales were up in single figures from a year earlier,” Keith Perkin, chief executive officer of Retravision, said in an interview. “We sold a lot of air conditioners because the weather was warm.”

Retravision has 500 stores across Australia selling electronics and home appliances.

“I wouldn’t say it was an outstanding Christmas,” Perkin said. “Consumers are nervous and sales have been longer and the reductions have been more drastic because everyone is trying to move stock.”

Retail spending may slow in January after the Australian Institute of Petroleum reported the average price of unleaded gasoline rose to a three-month high of $1.22 a liter in the week ending Jan. 20.

“Consumers are stretched financially, house prices are falling, and that’s making them cautious,” Kieran Davies, chief economist at ABN Amro Australia Ltd., said in Sydney before today’s report was released.

Christmas Discounts

“Retailers were trying to combat the slowdown by discounting pretty heavily before Christmas,” Davies said. “Still, discretionary spending is suffering. The Reserve Bank has no need to raise interest rates.”

Central bank Governor Ian Macfarlane and his board meet for the first time this year on Feb. 7. All 22 economists surveyed by Bloomberg News forecast the bank will keep the overnight cash rate target at 5.5 percent. It announces a decision the following day.

The bank has left borrowing costs unchanged since raising the benchmark rate a quarter percentage point last March.

“There is no need for a change in interest rates,” Retravision’s Perkin said. “The economy is ticking over, it’s really just bubbling along with growth that’s not too dramatic.”

Australia’s economy, in its 15th year of expansion, grew just 0.2 percent in the third quarter of 2005, the slowest pace in a year, as exports fell and home building declined, according to government figures released in December.

Among recent signs that the slowdown extended into the fourth quarter, business confidence fell for a second month in three in December and companies plan to curb investment and employment, a survey released this week showed.

Australia’s home-building approvals had their biggest drop in four months in December, the statistics bureau said yesterday. Approvals to build houses or apartments dropped 3.5 percent from November.