* Retail sales -2.7% in July vs. forecasts -2.3%
* Further weakness is expected as Melbourne is hit by lockdowns
* Boost consumption to see the economy shrink in the third quarter (Adds details, background)
SYDNEY, Aug 27 (Reuters) – Australian retail sales plummeted in July as coronavirus lockdowns closed stores and services in the country’s largest city, further evidence that the economy will contract sharply this quarter as the Delta variant of the virus is spreading.
Figures from the Australian Bureau of Statistics on Friday showed retail sales in July were down 2.7% to A $ 29.8 billion ($ 21.55 billion) from June, when travel restrictions had already led to a 1.8% drop. had led. It was the biggest drop this year and even worse than the market forecast of 2.3%.
The A $ 360 billion retail sector accounts for around 18% of GDP and further weakness is expected this month as lockdowns hit Melbourne and Canberra.
Sales in the state of New South Wales plummeted nearly 9% in July, and a similar decline is likely for Victoria in August.
The harsh effects on consumption, employment and hours worked are sure to result in a slowdown in economic output this quarter, ending a remarkably strong recovery from last year’s pandemic downturn. “We estimate 550,000 workers have been laid off because of the lockdowns,” said Gareth Aird, chief executive of CBA’s Australian business division.
“We have revised our GDP estimate for the third quarter downwards to expect a decline of 4.25% from -2.75% previously.”
This could even spark yet another recession, although analysts hope the recent rapid advances in vaccinations will allow affected cities to open up enough in the fourth quarter to avoid such a bleak outcome.
After a hesitant start, the vaccination rate has accelerated significantly, reaching an average of 260,000 per day in the past week. Just over 32% of the adult population are now fully vaccinated, while 55% are receiving at least one dose.
Prime Minister Scott Morrison’s Conservative administration has drawn up plans to open the economy once 70% of adults are vaccinated and to avoid lockdowns altogether once 80% of the population is covered.
The Reserve Bank of Australia (RBA) also expects consumption to recover rapidly once restrictions ease.
With Sydney and Melbourne now closed for much longer than initially assumed, however, the central bank is under pressure to postpone the tightening at its next monetary policy meeting on September 7th ($ 1 = 1.3827 Australian dollars) (Reporting by Wayne Cole; editor by Christian Schmollinger and Sam Holmes)