The Australian economy seems stuck between favorable and difficult conditions since the Omicron variant began to spread in the country. This led to a series of ups and downs for major economic indicators. While retail trade is steadily improving in the country, international trade is not yet recovering with the same vigor.
Recent data from the Australian Bureau of Statistics (ABS) supports the above position. According to the ABS, November 2021 saw retail trade increase by 7.3% on a monthly basis and 5.8% on an annual basis. Over the same period, the goods and services surplus fell by A$1,358 million from October 2021, due to a larger rise in imports.
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Pre-Christmas sales hit record highs
November was a big month for retail sales in Australia. The massive 7.3% increase in overall retail activity drove retail sales to an all-time high. The previously set record of November 2020 has also been surpassed in 2021 as consumers prepare for the holidays amid a rapidly recovering economy.
November also marked the fourth strongest monthly increase in retail sales, which stood at its highest level on record. The easing of restrictions has helped retail sales recoup all the ground lost to the delta variant, particularly in southeastern states and territories. Notably, Victoria recorded the highest sales increase of 20%, followed closely by the Australian Capital Territory, where sales increased by 19.2%.
The surge in sales emerged in part due to the period of the lifting of restrictions coinciding with the boom in consumer demand before the holidays. Many consumers took advantage of the holidays to relieve some of their pent-up demand for consumer goods. Ultimately, apparel, footwear, housewares, and department items were among the segments that benefited from the surge in sales. However, food retail saw a drop in sales during the month as more consumers likely opted to dine out.
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International trade takes a hit
The balance of goods and services has been steadily declining since July 2021. In November 2021, the indicator fell to A$9,423 million, reflecting a decline of over A$1.3 billion from the previous month. While exports (credits) of goods and services increased by 2% to reach A$43,859 million, imports (debits) jumped by 6% to reach A$34,436 million. Exports from other rural sectors led to an overall increase in exports, while an increase in imports of primary industrial supplies led to an increase in imports.
While exports have yet to gain traction in the country, Australia is in the process of developing trade relations with other countries. More recently, the UK signed a trade deal with Australia to strengthen post-Brexit relations with the country. Additionally, Australia is in talks with India on an interim trade deal between the countries. The agreement on goods, services, investment and government procurement should mutually benefit both countries.
In a nutshell, November was the perfect time for the economy to see a boom in consumer spending amid the pre-Christmas craze. However, the economy could become subject to a decline in consumer confidence in the wake of the Omicron variant. The virus threat could hamper international trade as economies take a cautious stance to examine the effects of the new variant.
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