SYDNEY: Panic buying at Australian grocery stores pushed up retail sales in February, although that is unlikely to ease the chances of a recession as the coronavirus pandemic forced the government to widen its ban on travel and social gatherings.
Preliminary data from the Australian Bureau of Statistics (ABS) today showed the rise of 0.4% in retail sales, which followed declines in December and January, was largely driven by food retailing, which accounts for 40% of total trade.
A mad rush to stores by panicked shoppers as coronavirus news fanned fears of shortages of essential items has led to earnings upgrades for Australian grocers such as Woolworth and Coles
But discretionary spending – a more accurate gauge of consumer confidence – remained in the doldrums with clothing, footwear and personal accessory down while duty-free stores and luxury goods retailers reported declines in February.
“Since retail trade only accounts for about 30% of total household consumption, front-loading purchases is unlikely to offset lower spending elsewhere. Therefore, we still expect a negative Q1 GDP print,” Citi economist Josh Williamson wrote in a note.
Australia’s A$ 2 trillion (RM5.2 trillion) economy has had a dream run of nearly three decades of uninterrupted growth but that is likely to come to an end.
ANZ Banking Group forecasts the country’s gross domestic product (GDP) to contract by 2% in the second quarter alone and 1.9% in the year to December 2020.
“Policy stimulus will help, but it won’t be able to offset the demand loss that will come from social distancing and widespread closures,” ANZ economists wrote in a note.
“The outlook is more uncertain than usual,” they said pointing out that their forecasts assume economic shutdown, but only for some parts of the economy and only for weeks.
“Longer or wider-spread disruption will result in a deeper drop in activity and a sharper rise in unemployment.”
Australian Prime Minister Scott Morrison today declared a “human biosecurity emergency” and added the measures could last for six months or more.
Fears of a long recession and a hit to corporate profits have already battered Australian shares, pummelled the local dollar to a 17-year low and caused a breakdown in the bond market.
Recent market carnage prompted the Reserve Bank of Australia (RBA) to pump the system with additional liquidity and promise further policy measures on Thursday afternoon. Investors are widely expecting a rate cut to a record low 0.25% and the launch of quantitative easing.
Morrison also flagged fiscal measures in coming days, with the combined stimulus expected to cushion the blow from the virus.
“The second half of the year should see a strong rebound in activity as interest rates will remain very low,” said Diana Mousina, senior economist at AMP Capital. – Reuters