Australian Retail Sales Dip in December After Black Friday Surge

Australia’s retail sales slipped 0.1% in December, following a 0.7% jump in November, as consumers slowed spending after Black Friday splurges. The decline, however, was less than the 0.7% drop analysts expected, thanks to Cyber Monday discounts and extended holiday promotions, according to the Australian Bureau of Statistics (ABS).

"Cyber Monday boosted household goods sales as shoppers took advantage of big-ticket discounts," said Robert Ewing, head of business statistics at ABS.

Despite the December dip, fourth-quarter retail sales climbed 1.0% to A$105.8 billion ($64.93 billion), surpassing forecasts of a 0.8% rise. The increase, the largest since early 2022, was fueled by government tax cuts and subsidies, helping drive consumer spending. Analysts estimate this could contribute around 0.2 percentage points to GDP, a crucial boost amid high mortgage rates and rising living costs.

Market expectations for interest rate cuts are rising, with a 95% probability that the Reserve Bank of Australia (RBA) will lower its 4.35% cash rate by 25 basis points at its February 18 meeting. Futures pricing suggests two rate cuts by the end of 2025.

A softer-than-expected inflation report has strengthened the case for rate cuts. "Disinflation has progressed faster than the RBA anticipated, giving the Board confidence to start easing," said Westpac chief economist Luci Ellis. She predicts additional cuts in May, August, and November, bringing rates down to 3.35%.

Global trade risks also loom, with U.S. tariffs on China, Mexico, and Canada threatening Australia’s resource exports. Concerns over economic growth saw the Australian dollar drop 1.6% to its lowest level since the 2020 pandemic, trading at $0.6115.