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Australian retail turns negative in July -

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ELEANOR HALL: There's more evidence of a slowing economy this lunchtime with official retail sales in July turning negative.

The monthly reading went backwards by 0.1 per cent.

This follows yesterday's stark GDP numbers which pointed to a dramatic slowdown in Australia's economic growth.

Joining us with today's details is business editor Peter Ryan.

So Peter, how worrying are these figures on top of those weak growth numbers for the three months to June?

PETER RYAN: Well Eleanor, every tiny bit of data is being scrutinised much more than usual at the moment and these retail numbers could be the latest evidence that the economy might be slowing.

Retail spending, as you said, went negative in July - contracting by 0.1 per cent. That contradicts expectations that sales would come in at a still pretty sluggish 0.4 per cent off the back of stronger sales in July where there was growth of 0.6 per cent.

Seasonally adjusted - according to the ABS - the falls have come from household goods retailing, down 1.9 per cent and other retailing down 0.6 per cent.

Now both of these sectors had risen in June so this is quite a significant turnaround.

ELEANOR HALL: So where are consumers spending their money?

PETER RYAN: Well, as we've seen in the past when sentiment has at least, felt low, the purchases have become a bit more personal. This time there've been rises in clothing, spending on footwear, personal accessories: things like lipstick and cosmetics for women, ties for men - up 2.9 per cent.

Department store spending is up 1.3 per cent. Cafes, restaurants, takeaway food up a third of 1 per cent so people are still out there enjoying themselves as much as they can but looking on a state by state basis, the cautious consumer has taken a notch out of retail in most states, mainly New South Wales, Victoria, the ACT, but with the biggest fall in South Australia, down 0.8 per cent.

ELEANOR HALL: Now Peter, these retail figures are just for one month. So can we really read much into them? I mean there is a bit of talk at the moment about Australia possibly heading for a recession?

PETER RYAN: Well, that's right. Just looking at some of the talk following those GDP numbers yesterday.

Firstly, you need to have two consecutive quarters of negative growth for a technical recession and we haven't even had one yet.

But the June quarter of 0.2 percent GDP and 2 per cent over the year was held up mainly by government spending and that is a bit of a concern.

So while these monthly figures can be quite volatile, they are all part of a broader picture which is showing up in the Australian dollar which fell to 70.1 US cents just after those retail numbers hit.

But there are expectations the dollar might fall even further, closer towards 65 US cents by the end of the year.

Now this might be bad news for listeners who might like to do their online shopping, but on the other side of the coin its long awaited relief for exporters who were struggling under the surging Australian dollar which went as high as 111 US cents a few years back.

So there are swings and roundabouts here, especially coming off the back of that once in a century mining investment boom according to Shane Oliver, chief economist at AMP Capital Investors.

SHANE OLIVER: The Australian dollar is doing what it should do. I mean this is the buffer that we got the benefit of through the post float period that when commodity prices go up, the Aussie dollar goes up, takes a bit of heat out of the economy.

When the commodity prices come down and they have come down dramatically. Just think about the iron ore price, it's down 70 per cent from where it was at the high point four years ago.

So a big fall there and of course, now we're overshooting. We overshot on the upside when we went to $1.10. The norm is around 75.

We've now come below that and I think we've got further to go and the growth figures we saw yesterday just highlight that the economy still needs more help.

LEANOR HALL: That's the chief economist at AMP Capital Investors, Shane Oliver

So Peter, separate to the retails sales this morning, the Myer department store has been sold down by investors. What's going on there?

PETER RYAN: Well, the Myer chain has been hurt badly by changing consumer habits and renewed competition from David Jones.

But today, Myer shares fell as much as 21 per cent; that's to a record low of 95 cents, and the company has lost two-thirds of its market value since listing back in 2009.

So anyone who bought into that float would have been somewhat burned.

Now earlier this week, Myer said it would sell $221 million in new shares to cut debt and to fund a turnaround.

Big investors are questioning this strategy as Myers new chief executive continues to address what he calls "underlying" issues in the business.

ELEANOR HALL: One to watch, business editor Peter Ryan, thank you.