Australia: Modest start to activity in Q2 – RBC CM

Research Team at RBC Capital Markets, notes that Australia’s April retail sales and trade data suggest a modest start to activity in Q2.

Key Quotes

“Seasonally adjusted retail sales rose by 0.2% in April (cons 0.3%). A drop in food sales (-0.3%) suggests slightly firmer core retail sales of 0.5%, although this follows a couple of weaker months.

An improvement in the April trade balance to -AUD1.6bn marked the smallest monthly deficit in over 12m, although we are mindful of a particularly poor performance for much of the last year with historically large monthly trade deficits pushing the current account deficit above 5% of GDP.

Our AU economists argue the notably lacklustre performance by the consumer is not surprising given the numerous headwinds for households that have been evident for some time. The policy implications are limited but nevertheless confirm the tepid pace of domestic demand that we expect to persist into 2017 and which should support the RBA’s easing bias beyond the next 25bps cut.”