'A very weak result': Australia's next retail sales report could be a shocker

GABRIEL BOUYS / AFP / Getty Images
  • NAB’s cashless retail sales index suggests Australian retail sales plunged in April.
  • It’s predicting a decline of 0.5%. If correct, that would be the weakest monthly result in nearly two years.
  • The NAB index has a reasonable track record for predicting movements in the official ABS data.
  • Australia’s April retail sales report will be released on June 4, the same day the RBA holds its next interest rate decision.

Get set for an ugly Australian retail sales print for April. According to the National Australia Bank’s cashless retail sales index, an alternative measure on spending levels that has been a good lead indicator on the ABS official data, a shocker could be on the way.

“Unfortunately, our data mapping brings a very weak forecast for retail trade for April,” said NAB’s chief economist Alan Oster.

“We forecast that ABS retail trade will fall 0.5% a month on month basis, the weakest forecast in our series going back some half a decade.”

Here’s how the NAB index has fared in tracking official movements in the ABS retail sales measure in the past.

NAB

So, if the NAB measure is right — and it has been on several occasions in the past — retail sales may have plunged in April.

You’d have to go back to the second half of 2017 to find a result that weak in the official retail sales data.

The NAB Index uses personal transaction data from the bank’s platforms to track electronic spending patterns. Based on around two million transactions per day, it provides an early and often reliable indication on retail spending patterns across the nation.

Oster is clearly putting a lot of faith in the NAB series, describing it as “a very weak result which further underlines our broader concerns about the Australian economy”.

NAB, like pretty much every other forecaster, predicts the RBA will cut Australia’s cash rate by 50 basis points to 1% by the end of the year.

It expects two 25 basis point reductions, the first in June and again in August.

At its May monetary policy meeting, the RBA described the outlook for growth in consumption, of which retail sales accounts for a little under a third, as a “key uncertainty” for Australia’s overall growth outlook.

“The risks to consumption were tilted to the downside, given the extended period of low income growth and the adjustment occurring in housing markets.”

If the NAB cashless retail sales index is on the money, those risks may have already become reality.

We’ll find out the answer when the ABS releases Australia’s official retail sales report for April on Tuesday, June 4. That just happens to be the same day the RBA June monetary policy meeting will take place.

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