Retail sales have grown and should keep growing, slowly


Retail sales grew 0.5% in line with our expectations.  

There has been a very slight pickup in sales growth in recent months, but remains consistent with a moderate pace of growth in consumer spending. 

The annual rate of growth stepped up to 3.9% in October. There remains scope for consumers to lift spending further, given the high rate of household savings. However, this would likely require a sustained lift in consumer confidence. 

We continue to expect retailing will grow at a moderate pace over the medium-term.

Share Markets:

A better than expected US employment report on Friday night lifted investor confidence.

This boosted the US stockmarket, reversing the losses of the previous session.

The Dow, the S&P 500 and the Nasdaq all rose 2.1% for the session.

The European stockmarket edged lower, following sharp losses in the previous session, on lingering disappointment in the European Central Banks (eCB)stimulus measures.

The German Dax slipped 0.3% and the Euro Stoxx was down 0.4% for the session.

Interest Rates:

The US payrolls data was the last major jobs data before the Fed's December FOMC policy meeting.

The better than expected data boosted confidence in the economy and drove expectations the Fed is likely to raise interest rates in December.

US bond yields fell on Friday night as average hourly earnings data and a fall in the oil price indicated inflation is likely to remain contained. 

This reinforces the view that the Fed can hike interest rates at a gradual pace next year.

Australian government bond yields rose on Friday, but bond yields (implied by futures) retraced some of those gains on Friday night, tracking the move in US yields.

Foreign Exchange:

The US dollar index (weighted against a basket of currencies) edged marginally higher. 

The Euro drifted slightly lower, but largely held onto its gains from the previous session after the ECB stimulus disappointed markets.

ECB President Draghi said there was no limit to the ECB's stimulus tools. 

The US dollar gained ground against the Yen. USD/JPY rose from 122.47 yesterday morning, to currently trade at 123.19.

The Aussie dollar was volatile around payrolls, finishing slightly softer against the US dollar from Friday morning. AUD/USD rose to a high of 0.7385, before retracing to trade around 0.7337 at the time of writing.


The oil price declined, with West Texas Intermediate falling US$1.10 to US$40 per barrel. Following a meeting, the Organisation of Petroleum Exporting Countries (OPEC) signalled it will remove its daily output target, suggesting ongoing global oversupply of oil. 

United States: 

The US non-farm payrolls report for November beat consensus expectations, defying the weaker trends in the ISM surveys.

Payrolls rose 211k in November, along with very healthy upward revisions to the last two months of +35k, so that October's increase was 298k (previously reported as a 271k increase).

By industry, gains were fairly widespread, with construction jobs rising a solid +46k, manufacturing still soft slipping 1k, and retailing rising by a decent +31k for November.

The participation rate ticked up 0.1 percentage point to 62.5%.

The unemployment rate (taken from the household survey) held at 5.0% in November. The underemployment rate edged up to 9.9% in November, from 9.8% in October.

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