Softer-than-expected retail and housing data for May is fuelling expectations the Reserve Bank of Australia (RBA) could cut interest rates at its meeting next week.
The Australian Bureau of Statistics (ABS) reported retail sales rose just 0.2% for the month, missing forecasts for a 0.5% gain and following a 0.1% decline in April. Household spending also remained subdued, with only modest growth led by clothing purchases.
“Retail spending rose in May driven mainly by a bounce-back in clothing purchases,” the ABS said. “Retail spending was otherwise restrained this month, with a drop in food-related spending and flat results across household goods.”
Economists at Commonwealth Bank had tipped a stronger 0.5% rise in both retail and household spending, suggesting some improvement in consumer confidence.
Building approvals data also underwhelmed, lifting 3.2% in May — short of the expected 4% rise. The increase was mostly driven by an 11.3% jump in private dwellings excluding houses, while approvals for standalone houses edged up just 0.5%.
The RBA meets on July 7–8, with Governor Michele Bullock to front a press conference after the decision on July 8. Market pricing currently sees a 90% chance the central bank will cut the cash rate by 25 basis points to 3.60%.
With spending data pointing to cautious consumer behaviour, talk of a rate cut is likely to intensify in the days leading up to the meeting.