Retail sales rose in April by 0.2% mom, just shy of market expectations (+0.3%) and after a revised 0.4% fall in March. By category, the stronger elements of the retail sales report were clothing and footwear stores, +1.8% mom; food retailers +0.5%; and restaurants and cafes, +0.5%. The weak parts were household goods, -0.6% and department stores, -2.0%. By state, the shift towards stronger spending in the high population states continued with retail sales up by 0.6% in NSW and by 0.3% in Victoria, but down by 0.8% in Western Australia.

Separately Q1 business indicators showed company profits up a stronger than expected 3.0% q-o-q (consensus, +1.5%) but business inventories down by 0.6% (consensus, 0.0%). Business inventories will detract about 0.3pp from Q1 GDP out on Wednesday. Two more key components of the Q1 GDP story will be released tomorrow, Q1 government spending and Q1 net exports. A great deal of information on Q1 net exports has already been released and it appears that net exports will contribute at least 0.8pp to Q1 GDP. Household consumption expenditure is likely to be another big contributor to GDP, part offset by the fall in business investment spending. Q1 GDP still seems to be travelling around +0.8% qoq, which if confirmed on Wednesday would show that the non-mining investment parts of the economy are more than taking up the slack from the pull-back in mining investment so far. Expectation of this configuration of growth is likely to be a factor encouraging the RBA to keep the cash rate on hold at 2.75% at its meeting tomorrow.