Soft retail figures indicate a less than robust economy

A softer than expected retail sales result suggests the economy is not as robust as first thought as consumers remain reluctant to open their wallets, according to economists.

Australian retail trade at current prices rose 0.3 per cent in September to a seasonally adjusted $20.509 billion, from a downwardly revised $20.456 billion in August, the Australian Bureau of Statistics (ABS) said.

Over the September quarter, retail sales rose by 0.7 per cent to $60.156 billion in seasonally adjusted volume terms.

The median market forecast was for retail sales to have risen by 0.5 per cent in the month and 1.0 per cent in the quarter.

CommSec chief economist, Craig James, said slumping building approvals figures released on Wednesday and weak retail spending were factors which would be on the mind of Reserve Bank of Australia (RBA) board members in December.

"It suggests that the economy is not as robust as what the Reserve Bank feels and it clearly has to reduce future expectations for rate hikes in 2011," James said.

Consumers remained cautious, following the "modest" quarterly result, he said.

"They're certainly not spending like there's no tomorrow," James said.

"You certainly can't say that the recent rate hike was on the back of strength in consumer spending."

He said consumers would continue to look for bargains in the lead up to Christmas.

Consumers were clearly looking at their budgets very closely, as utilities costs rise along with interest rates, James said.

However, he said the strong Australian dollar was pushing down the price of imported goods and online competition meant consumers had greater choice of where to shop.

James said the balance of goods and services results came in "broadly in line" with expectations.

"There are no major implications for the Aussie dollar, no major implications for the investment markets," he said.

The Australian balance of goods and services was a surplus of $1.760 billion in September, seasonally adjusted, from a upwardly revised surplus of $2.446 billion in August, the Australian Bureau of Statistics (ABS) said.

The median market forecast was for a surplus of $2.0 billion in the month.

During the month, exports were down 2.0 per cent in adjusted terms, while imports were up 1.0 per cent.

"Australia's continuing to pay its way in the world and that's what you'd hope given the strength of commodity prices," James said.

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