- Australian retail sales jumped by 0.8% in February, the largest monthly increase since November 2017.
- Non-food sales — deemed a better guide on discretionary spending — rose by an even faster 0.9% from January.
- Strong growth was seen across all states and territories except for Tasmania, including in New South Wales and Victoria where home prices have fallen the fastest over the past year.
- In separate data today, Australian new car sales rose by 5.6% in March in seasonally adjusted terms. Combined, the data points to a broader recovery in household spending in recent months.
Australian retail sales soared in February, lifting by the most since November 2017.
According to the Australian Bureau of Statistics (ABS), retail turnover surged by 0.8% after seasonal adjustments, breezing past expectations for a far smaller increase of 0.3%.
Putting the scale of the beat into perspective, it was above every economist forecast offered to Bloomberg.
The surprise result left annual growth in sales at 3.2%, the fastest increase since October last year.
While impressive, the sharp rebound must be put in context. Sales actually fell by 0.4% in December and only increased by 0.1% in January, so the February splurge followed some pretty weak results beforehand.
“There were improved results across most industries,” said Ben Faulkner, Director of Quarterly Economy Wide Surveys at the ABS.
Sales at department stores surged, lifting by a remarkable 3.5%. Spending on clothing, footwear and personal accessories, along with household goods, also rose by more than 1%, increasing by 1.6% and 1.1% respectively.
Food retailing — the largest component by dollar spend — also rose by 0.8%.
Those gains helped to offset flat results for spending at other retailers and cafes, restaurant and takeaway services.
Excluding food, non-food turnover — regarded as a better indication of discretionary spending patterns — increased by a slightly faster 0.9% following a flat result in January.
Over the year, non-food sales grew by 2%, an improvement from 1.8% in January but well below the 3.2% lift registered for total retail turnover.
Mirroring the performance by category, turnover increased briskly across all states and territories except for Tasmania in February.
The ACT led the spending renaissance with sales surging by 1.7%, followed closely by the Northern Territory and Queensland with gains of 1.4% apiece.
Sales in South Australia and and Western Australia grew by 0.7% and 0.6% respectively.
Suggesting headlines about steep declines in Sydney and Melbourne home prices have yet to discourage consumers from hitting the shops, sales in Victoria and New South Wales also rose strongly, increasing by 0.8% and 0.6% respectively.
Tasmania was the exception to the broader rule with sales declining 0.7% from a month earlier.
After a horrid run of late, the February report is some welcome news for not only retailers, but also the broader Australian economy.
It will also be welcomed by the Reserve Bank of Australia (RBA) who continue to describe the outlook for household spending as an area of uncertainty for the economy. This result may help to ease that uncertainty, at least in the near-term.
“Some very positive consumer news today,” said Michael Blythe, Chief Economist at the Commonwealth Bank. “Perhaps consumers are spending their tax cuts in advance!”
Adding to optimism about the health of the consumer, Blythe says that new car sales jumped by 5.6% in March in seasonally adjusted terms, according to data from VFACTS.
“Household good retailing and car sales are two areas where the RBA anticipated a negative wealth effect from falling house prices,” he said.
“Today’s data sits at odds with that view.”
Felicity Emmett, Senior Economist at ANZ Bank, said the February result points to importance of job market conditions remaining firm at a time when property prices are falling.
“The relative resilience in spending suggests to us that labour market strength is providing a meaningful offset to the fall in house prices for consumers,” she said.
However, not everyone believes the February bounce will be sustained.
“The Australian economic backdrop is still mixed and we expect that the strong rise in retail sales over February won’t be sustained,” said Diana Mousina, Senior Economist at AMP Capital. “We remain cautious on the outlook for Australian consumers and the economy more broadly”.
Ben Jarman of J.P. Morgan expressed similar caution to the result.
“It is obviously too early to declare the coast is clear for the consumer,” he said.
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