Insight into Retail and Housing Strength

On February 2, 2025, it was reported that the recent retail sales figures came in stronger than expected, which might have implications for the central bank's decisions regarding interest rates. Many believe this data could lessen the likelihood of a rate cut from the Reserve Bank of Australia (RBA).

Prior to the release of this data, traders were anticipating a more than 90 percent chance that the RBA would decrease rates by 25 basis points during its meeting on February 18, especially after the inflation report released at the end of January showed unexpectedly low figures.

This week, the Australian Bureau of Statistics is set to publish retail spending data for December, which may offer further insights into the economic situation. Additionally, CoreLogic's home value index is expected to reveal whether the ongoing housing downturn persisted into January.

While it is anticipated that retail turnover will drop following an initial spike due to early Black Friday sales, economists from NAB, Tapas Strickland and Taylor Nugent, believe that these figures will not significantly alter the RBA's outlook.

NAB was the last of the major banks to advance its prediction for a rate cut from May to February, largely influenced by trimmed mean inflation, which fell below expectations at 0.5 percent for the December quarter. This drop was attributed to weaker housing costs towards the end of 2024.

CoreLogic's upcoming report will help determine if the trends of declining home values continued into January, with AMP's chief economist, Shane Oliver, forecasting a slight 0.1 percent drop in national home prices, matching the decline observed in December.

Despite the ongoing housing downturn, a shortage of new housing supply is expected to stabilize home values. The federal government has set a goal to construct 1.2 million new homes over the next five years.

On the same day, the statistics bureau will also release figures on building approvals for December. Although there has been a gradual increase in approvals since early 2024, the November total of 14,998 still falls well short of the 20,000 approvals needed monthly to meet the government's housing targets.

Meanwhile, market watchers are looking closely at economic updates from the United States. Employment figures are expected to be released this Friday, shedding light on the labour market, which remains robust with an unemployment rate of 4.1 percent.

Technology giants like Alphabet and Amazon are slated to report earnings soon, following some turbulence in the tech sector related to developments from a new Chinese AI competitor, DeepSeek.

U.S. stock markets faced a downturn recently after announcements regarding new tariffs on imports from Canada, Mexico, and China. As a result, major indices like the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite all closed lower.

In Australia, share futures experienced a decline, but the local market closed at an all-time high, surpassing previous records. The S&P/ASX200 index rose to 8,532.3, and the broader All Ordinaries index reached 8,789.7, marking a positive trend despite global market challenges.

retail, housing, economy