Australian Retail Sales Fall

Australian Retail Sales came in at -0.1% m/m versus an expected gain of 0.3% and a previous reading of 0.0%.

This follows the rather large miss in the Australian Trade Balance earlier this weak and the previous number being revised substantially lower. Actual: -2.64B, Exp: -2.21B, Previous -2.44B

These data prints coming in lower than expected should not surprise anyone. Australia's economy has recently shown serious signs of deterioration, especially in the month of December. Forex Factory shows that of 22 economic data releases in the month of December, 60% of them either missed the consensus estimate to the downside, or came in lower than the previous reading. The ones that did not miss or come in lower were definitely not good. Yet, AUD/USD continues to trend upwards. We believe the high correlation between AUD/USD and the S&P 500 is the reason why. If the U.S. equity markets were to unravel, there is a strong fundamental argument to be made for a sharp decline in AUD/USD.

Below are the Australian economic data releases for the month of December.

                                                                                Actual          Expected           Previous
DROP  AIG Manufacturing Index                                    43.6                                        45.2
DROP  MI Inflation Gauge m/m                                    -0.1%                                        0.1%
DROP  NAB Business Confidence                                    -9                                             -1
DROP  Westpac Consumer Sentiment                           -4.1%                                        5.2%
DROP  MI Inflation Expectations                                   1.8%                                         2.2%
DROP  MI Leading Index m/m                                       0.1%                                        0.6%

MISS  Private Sector Credit m/m                                 0.0%               0.3%                   0.1% 
MISS  Company Operating Profits q/q                         -2.9%              -2.8%                  -0.3% 
MISS  Retail Sales m/m                                               0.0%               0.4%                   0.5%
MISS  Building Approvals m/m                                    -7.6%              -1.8%                   9.5%
MISS  Current Account                                               -14.9B             -14.7B                -12.4B
MISS  GDP q/q                                                            0.5%               0.6%                   0.6%
MISS  Home Loans m/m                                              0.1%               3.1%                   1.1%

- Trade Balance *1                                                     -2.09B            -2.15B                -1.42B
- ANZ Job Advertisements m/m                                 -2.9%                                        -4.6%
- Commodity Prices y/y                                             -11.6%                                     -16.2%
- CB Leading Index m/m                                             0.2%                                        -0.4% 
- New Motor Vehicle Sales m/m                                   0.0%                                        -2.5%

- AIG Services Index *2                                               47.1                                         42.8
- AIG Construction Index *2                                        37.0                                          35.8

- 7:30pm Employment Change  *3                              13.9K                  0.2K                10.2K
- Unemployment Rate  *3                                            5.2%                  5.5%                 5.4%


*1: Australia's economy is driven by exports. Bad trade balance numbers have negative implications for the economy

*2: A number below 50 means contraction.

*3: Both of these numbers are not necessarily good. The drop in the unemployment rate was due to a drop in the participation rate as job seekers became discouraged and stopped looking for jobs. The rise in overall employment was good, but only due to the increase in part time jobs. Full time jobs actually dropped by 4200 in December.