Australian retail sales slipped unexpectedly in April as warm weather hit spending on winter clothing, data showed on Friday, while department stores suffered from a dearth of discounting events in further evidence of a cautious consumer.

The weakness came despite lower borrowing costs and a cooling in inflation, supporting investor wagers for a further cut in interest rates when the Reserve Bank of Australia next meets in July.

Data from the Australian Bureau of Statistics showed retail sales fell 0.1% in April from March, confounding analyst forecasts for a 0.3% increase and ending three months of gains.

Sales of A$37.2 billion ($23.91 billion) were up 3.8% on a year earlier, a slowdown from 4.3% in March and historically sluggish given annual population growth is running around 1.7%.

Food, clothing and department stores all saw falls, while household goods and eating out had a better month due in part to catch-up spending in Queensland following widespread floods.

“Clothing retailers told us that the warmer-than-usual weather for an April month saw people holding off on buying clothing items, especially new winter season stock,” said Robert Ewing, ABS head of business statistics.

Retail sales account for around 35% of household consumption, so the data point to a soft start to the second quarter. Consumption made almost no contribution to economic growth last year, a miserly result usually only seen during recessions.

That weakness was a major reason the RBA cut interest rates by a quarter point to 3.85% this month, and why markets expect at least three more easings this year to 3.10%.

Its first rate cut in February seemed to have little impact on consumers, with retail sales flat in volume terms over the March quarter and broader spending only inching ahead.

The frugal outcome led the RBA to again downgrade its forecasts for consumption this year, though it still hopes a combination of past tax cuts, slower inflation and falling borrowing costs will embolden consumers over time.

Not helping the mood has been the wild swings in financial markets of recent weeks as U.S. President Donald Trump’s tariff plans darkened the global economic outlook.

Surveys showed a slump in consumer confidence in April that was only partly repaired by a pullback in sky-high U.S. tariffs on China, Australia’s single-biggest trading partner.

($1 = 1.5557 Australian dollars)

Author Credits- Wayne Cole
Reuters