Jo Masters, Senior Economist at ANZ, explains that Australian retail sales disappointed in both March and Q1, with soft volumes and weak retail inflation as trading conditions remain difficult given the combination of strong competition, weak pricing power and low household income growth.
Key Quotes
“The Q1 data sets up a weak base for Q1 GDP (to be released on 7 June), particularly as net exports are expected to detract from growth. The recent speech by RBA Governor Lowe highlighted the Bank’s growing concern about the vulnerability of the economy to shocks to the household sector given the high level of indebtedness. In line with this concern we have argued in earlier research that the household saving rate is likely to have risen in Q1. The soft retail sales data is consistent with this.”
“Retail sales fell for the second consecutive month, with nominal sales falling 0.1% in March, from a downwardly revised February. Sales are now just 2.1% higher than a year ago, the weakest annual growth rate since June 2013.”
“Sales were particularly weak in Queensland (-1.3% m/m). Sales in NSW were soft (+0.1% m/m), while in Victoria sales bounced back from February’s weakness.”
“Sales of food, household goods, department stores and cafés, restaurants & takeaway all fell in March, while clothing sales were up just 0.4% after a sharp fall in February. The weakness in sales of household goods is surprising given ongoing strong house price growth. Sales fell at both small and large stores in March.”
“Real quarterly retail sales were also below consensus expectations, rising just 0.1% q/q (from a downwardly revised 0.7% q/q in Q4 2016). This sets up a weak base for Q1 GDP, particularly with net exports expected to detract from growth. The RBA is clearly watching consumption closely, not only because it accounts for around 60% of the economy but because RBA Governor Lowe warned last week of the “possibility of future sharp cuts in household spending because of stretched balance sheets”. With retail weakening, an acceleration in the pick-up in non-mining business investment would, as the RBA noted in its post meeting statement this month, “be welcome”.”
“Retail prices rose by just 0.1% q/q and 1.5% y/y in Q1, again highlighting the price pressures in the retail sector. Household goods and department store prices fell in Q1, while clothing and soft good prices were up just 0.2%.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD holds above 1.0700 ahead of key US data
EUR/USD trades in a tight range above 1.0700 in the early European session on Friday. The US Dollar struggles to gather strength ahead of key PCE Price Index data, the Fed's preferred gauge of inflation, and helps the pair hold its ground.
USD/JPY stays above 156.00 after BoJ Governor Ueda's comments
USD/JPY holds above 156.00 after surging above this level with the initial reaction to the Bank of Japan's decision to leave the policy settings unchanged. BoJ Governor said weak Yen was not impacting prices but added that they will watch FX developments closely.
Gold price oscillates in a range as the focus remains glued to the US PCE Price Index
Gold price struggles to attract any meaningful buyers amid the emergence of fresh USD buying. Bets that the Fed will keep rates higher for longer amid sticky inflation help revive the USD demand.
Sei Price Prediction: SEI is in the zone of interest after a 10% leap
Sei price has been in recovery mode for almost ten days now, following a fall of almost 65% beginning in mid-March. While the SEI bulls continue to show strength, the uptrend could prove premature as massive bearish sentiment hovers above the altcoin’s price.
US core PCE inflation set to signal firm price pressures as markets delay Federal Reserve rate cut bets
The core PCE Price Index, which excludes volatile food and energy prices, is seen as the more influential measure of inflation in terms of Fed positioning. The index is forecast to rise 0.3% on a monthly basis in March, matching February’s increase.