Retail sales hold key

Despite the Australian wool market's second consecutive fall last week - down 3.3 per cent due mostly to macro-economic worries - retail clothing sales are holding.

The Landmark Wool Weekly report said garment sales in July were up strongly in China, the US and the UK.

"If consumer spending can be maintained in the next three months, sales of wool clothing should be good," Landmark said.

The National Council of Wool Selling Brokers of Australia executive director Chris Wilcox said wool had held up with AWEX reporting a 5 per cent fall in $US terms.

"This is comparable to the fall in cotton prices and better results for other commodity prices," Mr Wilcox said.

He said wariness about the global economy was highlighted in the new forecasts from the International Monetary Fund (IMF) which were released last week.

"The IMF says that the risks to the global economy are clearly on the downside, notable the crisis in the Euro zone," Mr Wilcox said.

"There is a serious risk that hasty fiscal cutbacks in the US will further weaken the outlook there."

Mr Wilcox said the IMF had wound back its forecast of economic growth in both 2011 and 2012 for the world in total and for the major advanced economies compared to its June forecast.

Also released last week were the forecasts from the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) which predicts wool prices to fall from the highs of 1400cents/kg for the Eastern Market Indicator (EMI) in July.

ABARES said the average for the EMI would be 1200c/kg, an increase of 6 per cent on the average for the 2010-11 season. The EMI closed at 1235c/kg last week.

Mr Wilcox said ABARES expected demand for wool products to remain relatively firm over the next 12-18 months, mainly due to continued growth in demand for wool products in China.

"ABARES expects that Australian shorn wool production in 2011-12 to be 355mkg, a 3 per cent increase on 2010-11," he said.

"However, ABARES expects wool export volumes to fall by 3 per cent in 2011-12 due to lack of stocks which boosted the export volumes in 2010-11."

National wool sales will decrease slightly this week to 43,398 bales and present estimates for weeks 14 and 15 are 47,000 and 41,700 bales respectively.