Sales (AURSCHNG) slipped 0.1 percent from a month earlier, when they rose a revised 0.1 percent, the Bureau of Statistics said in Sydney today. The result compares with the median forecast in a Bloomberg News survey of 26 economists for a 0.2 percent gain.

The report validates Reserve Bank of Australia Governor Glenn Stevens’s decision to lower the nation’s benchmark interest rate by a quarter percentage point on Nov. 1 and Dec. 6 to help revive household demand. The central bank’s board meets tomorrow to decide on rates, and most economists predict a third straight reduction.

“The trend of soft consumers going into Christmas and year end was still there,” said Ben Jarman, a Sydney-based economist at JPMorgan Chase & Co. “I don’t think this is a disastrous number and it’s certainly not one which makes the RBA have to cut tomorrow. We’ve got them cutting but I think it is a very close call.”

Futures traders priced in a 54 percent chance Stevens will lower borrowing costs by another quarter percentage point to 4 percent tomorrow. The Australian dollar bought $1.0738 at 12:30 p.m. in Sydney, from $1.0734 before the data.

Dining Out Slump

Today’s report showed spending at cafes and restaurants fell 1.8 percent, and consumers spent 0.7 percent less at food retailers, today’s report showed. They spent 3.5 percent more at clothing and footwear stores and 1.1 percent more at department stores, it showed.

Retail sales, adjusted to remove inflation, increased 0.4 percent in the three months through Dec. 31 from the previous quarter, the report showed. Economists had forecast a 0.6 percent gain.

Harvey Norman Holdings Ltd. (HVN), Australia’s biggest electronics retailer, said in October that sales fell in the three months through Sept. 30. It cited the strength of the local currency and “intense competition” for the weakness.

Australia’s higher borrowing costs relative to other developed-world economies and the mining-investment boom helped drive the Australian dollar to $1.1081 on July 27, the highest since exchange controls were scrapped in 1983.

It slipped in ensuing months as Europe’s debt crisis worsened. The currency has strengthened 5.2 percent this year and touched a six-month high of $1.0794 on Feb. 3.

Consumer Sentiment

Richard Goyder, chief executive officer of Perth-based Wesfarmers Ltd. (WES), Australia’s second-largest retailer, told reporters on a call last week that he doesn’t expect any “significant change” in consumer sentiment.

“There is a degree of uncertainty around at the moment for a whole lot of reasons around what’s going on globally, what people read about that, what people will see in terms of their” pension returns and house prices, he said Feb. 2. “Because of that lack of confidence generally I’m not sure that consumer sentiment is going to change a lot.”

Stevens lowered borrowing costs to 4.5 percent from 4.75 percent on Nov. 1, the first reduction since April 2009, and cut again to 4.25 percent on Dec. 6.

The nation’s economy lost 29,300 jobs in December, capping the worst year for employment since 1992.

A private survey today signaled the employment market may have started the year with an improvement, as Australian job advertisements on the Internet and in newspapers surged 6 percent in January, the most in 23 months.

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.ne

http://www.bloomberg.com/news/2012-02-06/australia-retail-sales-unexpectedly-fell-in-december-as-job-market-weakens.html

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