Wayne Cole

Sydney (Reuters) - Australian retail sales were unexpected in April as warm weather hits spending on winter clothing, data shows.

Despite lower borrowing costs and lower inflation, weaknesses are still supporting investors’ next Reserve Bank of Australia to further lower interest rates when it meets in July.

Data from the Australian Bureau of Statistics shows that retail sales fell 0.1% from March, which increased analyst forecasts by 0.3% and ended three-month earnings.

Sales of $37.2 billion ($23.91 billion) rose 3.8% a year ago, slowing 4.3% in March, given the historical slowdown in age growth of about 1.7%.

Food, clothing and department stores all see waterfalls, while household items and dining out months have a better month, in part because of catching up on spending in Queensland after extensive flooding.

“Clothing retailers tell us that the warmer weather in April has made people determined to buy clothing, especially the new winter stock,” said Robert Ewing, head of business statistics at ABS.

Retail sales account for about 35% of household consumption, so the data points to a soft start in the second quarter. Last year, consumption contributed little to economic growth, a shattering defeat that usually only occurred during recessions.

This weakness is the main reason why Royal National Yiji focuses on lowering interest rates to 3.85% this month and why the market expects at least three easing rates to 3.10% this year.

Its top-notch cuts in February seem to have little impact on consumers, with retail sales flat in the March quarter and spending only leads.

The thrift result has led Shuts to downgrade its consumption forecast again this year, although it still hopes that past tax cuts, reduced inflation and lower borrowing costs will thrive over time consumers.

There has been no helping sentiment in financial markets in recent weeks as US President Donald Trump's tariff plan has darkened the global economic outlook.

The survey showed a downturn in consumer confidence in April, which was only partially fixed due to a callback in Sky-Hir-Hir-High Tariffs, Australia's single largest trading partner, China.

($1 = AUD 1.5557)

(Reported by Wayne Cole; Editors by Tom Hogue and Jamie Freed)