New Insights into Retail and Housing Markets

On February 2, 2025, news emerged that stronger-than-expected retail sales figures could potentially lessen the justification for a central bank interest rate cut. However, the market remains confident that mortgage relief is imminent.

Traders had been anticipating a greater than 90 percent likelihood that the Reserve Bank of Australia (RBA) would reduce rates by 25 basis points on February 18, fueled by a surprisingly weak inflation report released at the end of January.

To further assess economic health, the Australian Bureau of Statistics is set to disclose retail spending data for December. Additionally, the property data firm CoreLogic will provide insights on whether the downturn in housing continued into January.

It is anticipated that turnovers will drop, as early Black Friday sales lifted retail figures in October (+0.5 percent) and November (+0.8 percent). Nevertheless, economists from NAB believe the result will not significantly influence the RBA's decision-making.

NAB was the last of the major banks to change its prediction, moving its forecast for a rate cut from May to February, following a lower-than-expected trimmed mean inflation rate of 0.5 percent for the December quarter. This decline largely stemmed from weak housing costs observed towards the end of 2024.

The ongoing performance of the housing market will be clarified with the upcoming release of CoreLogic's monthly home value index, with AMP chief economist Shane Oliver projecting a further 0.1 percent dip in national home prices, matching December's decline.

Despite a recent increase in building activity and dwelling approvals, a lack of new housing supply is expected to support home values. This follows the federal government’s ambitious plan to build 1.2 million new homes over the next five years.

Additionally, building approval figures for December will be released, indicating a gradual upward trend since the start of 2024. However, November's approval rate was just 14,998, significantly below the monthly target of 20,000 to meet the government's housing goal.

Many investors are also closely watching developments in the United States. Employment data is on the horizon, with non-farm payroll figures set to be released, as the US labor market remains relatively tight, registering an unemployment rate of 4.1 percent.

Tech giants like Amazon and Alphabet are poised to report their earnings after the sector faced turbulence due to the rise of Chinese AI competitor DeepSeek.

US stock markets closed lower on Friday following news of President Trump's announcement of tariffs, leading to a drop in major indices. The Dow Jones Industrial Average fell by 337.47 points, or 0.75 percent, while the S&P 500 and Nasdaq Composite also recorded losses.

In Australia, share futures saw a slight decrease, yet the local stock market achieved its highest level ever, surpassing the previous record set eight weeks ago. The benchmark S&P/ASX200 index rose by 38.6 points, or 0.45 percent, reaching 8,532.3, while the broader All Ordinaries gained 43.8 points, or 0.5 percent, to close at 8,789.7.

Retail, Housing, Data