Australian retail sales receive a boost from Black Friday sales

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  • Australian retail sales improved in November, boosted by Black Friday and Cyber Monday sales held late in the month.
  • Non-food sales increased by 0.6%. This is regarded as being a better guide on discretionary spending patterns.
  • Online retail sales accounted for 6.6% of total sales during the month, the highest level on record.
  • In 2017, sales brought forward Christmas spending into November, resulting in a big decline in sales during December. A similar scenario could occur again on this occasion.
  • Cumulative credit card spending through the CBA’s network fell 3.7% between November to early January compared to the levels of a year earlier, underscoring the risk of weakness in the December retail sales report.

Australian retail sales topped forecasts in November, recording the largest monthly percentage increase since April last year.

According to the Australian Bureau of Statistics (ABS), nominal turnover increased by 0.4% in seasonally adjusted terms, topping market expectations for an increase of 0.3%.

Sales previously increased by 0.3% in October, unchanged from the original estimate.

Ben Faulkner, Acting Director of Quarterly Economy Wide Surveys at the ABS, said the result was boosted by Black Friday and Cyber Monday sales held in late November.

“Household goods retailing, at 1.2%, led the rises,” he said.

“There was also a notable rise for clothing, footwear and personal accessories retailing of 1.5%. Both of these industries were impacted by strong promotional activity in the November month, including Black Friday sales.”

Excluding food sales, turnover increased by 0.6% after seasonal adjustments, the largest increase since August 2018. Many regard this as being a better guide on discretionary spending patterns across the country.

Adding to evidence of the impact of online sales in late November, the ABS noted online turnover accounted for 6.6% of total sales during the month in original terms, up from a 5.9% contribution in October. One year ago, online sales accounted for just 5.5% of total sales.

“This is the highest level recorded in the series and continues a pattern of increasing online contributions to total sales in November,” the ABS said.

Elsewhere, food and department store sales rose by 0.2% and 0.4% respectively, offsetting declines in “other” goods and at cafes, restaurant and takeaway services which fell by 0.1% apiece.

By state and territory, the ABS said that after falling heavily in the prior two months, sales in New South Wales, Australia’s most populous state, rose strongly, increasing by 0.8%.

At 1.6%, sales in the ACT led the national gain during November.

Turnover also increased by 0.6%, 0.4% and 0.1% respectively in Western Australia, Queensland and Victoria, offsetting declines of 0.9% and 0.2% respectively in the Northern Territory and Tasmania. Sales in South Australia were unchanged from October.

Despite the monthly total exceeding market expectations, sales growth over the year slowed sharply, falling from 3.6% in October to 2.8% in November. The steep slowdown, leaving annual growth in sales at the weakest level since May last year, reflects the high base effect created by a huge 1.2% increase in turnover that occurred in November 2017.

Excluding food sales, turnover increased by an even slower 1.9% from a year earlier, also the smallest gain since May 2018.

While, on the surface, the November result was reasonable, the key question now is whether the boost provided by sales late in the month brought forward spending that would normally be seen in December?

One year ago, after turnover surged by 1.2% in November 2017, that was followed up by a decline of 0.5% in December, reflecting the impact of Black Friday and Cyber Monday sales in bringing forward demand, along with issues in applying seasonal adjustments over November and December given these events are new to Australia.

The reversal in non-food sales in 2017 was even more acute with November’s 2.1% gain followed up by a 1.4% plunge in December.

Given what was seen during that period, there’s a clear risk a similar scenario plays out on this occasion.

Based on credit card transactions processed through the Commonwealth Bank between November and early January this year, the bank found that total cumulative spending was down 3.7% on the levels of a year earlier, underscoring the risk of some statistical payback when the December retail sales report is released early next month.

“Retail Sales data around this time of year are particularly interesting as consumer spending patterns have been shifting,” says Ray Attrill, Head of FX Strategy at the National Australia Bank.

“The rise of Black Friday, Cyber Monday and Click Frenzy sales have seen households bring forward their Christmas shopping and Boxing Day Sales shopping into November. Reports from retailers suggest sales in December were weaker than in November.

“As such, markets will likely interpret any strong November Retail Sales outcome with a degree of caution — a solid result could easily be offset by a weaker December result due to these shifting seasonal spending patterns.”

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