Australia: Retail sales disappoint again - ANZ

Jo Masters, Senior Economist at ANZ, notes that Australian retail sales growth disappointed again and momentum is clearly slowing as sales were flat in July and up just 2.7% y/y.

Key Quotes

“Disappointingly, sales in both NSW and Victoria fell for the second consecutive month. Retail sales continue to face several headwinds including weak wages growth, ongoing competitive pressures weighing on retail price inflation, and a structural shift in spending preference towards services. In contrast to the softness in retail sales, overall consumer spending has been growing quite solidly and we expect next week’s national accounts to show a continuation of that strength in Q2.

• July retail trade data confirmed a slowing trend, with sales flat m/m after a paltry 0.1% m/m rise in June. Sales are 2.7% higher over the year to July, the same soft annual growth rate recorded June, and well below the long run average.

• Further highlighting the downward trend, sales in three month-end annualised terms were up just 0.8% in July, compared with 1.7% in June and 4.7% in the same month last year.

• Importantly, both NSW and Victoria recorded a decline in retail sales for the second consecutive month, a disappointing result given that broader economic activity in both states remains robust. Sales fell by 0.2% m/m in NSW and 0.6% m/m in Victoria in July.

• Clothing sales were flat in July after a solid 4.4% m/m bounce in June, while spending on hardware, building, and garden supplies fell (by 1.4% m/m in July) for the third consecutive month despite high auction clearance rates and rising house prices.

• Department store sales fell a hefty 6.2% m/m in July and are down 3.8% over the year (the first y/y decline since April 2015). In a reverse from last month, large store sales fell by 0.7 m/m, whereas (the more volatile) small store sales rose by 1.3% m/m.

• Furniture sales remain strong (+1.4% m/m) while café, restaurants, and takeaway food sales jumped 1.2% m/m.”