Your 10-second guide to today's crucial Australian retail sales report

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Australia’s December retail sales report will be released later today, proving a snapshot of spending levels during the key Christmas trading season.

If the lead indicators are anything to go by, it’s likely to be weak. The only real question is how weak.

Being the December report, the release will also contain information on quarterly retail sales volumes. This figure will remove price movements and will feed directly into Q4 household consumption, the largest part of the Australian economy at over 50%.

With financial markets continuing to price in a greater than 50% chance that the RBA cash rate will be lowered by the end of this year, and with concerns about a housing-led slowdown in household spending elevated, today’s report will attract far more attention than usual, and could potentially lead to an increase in Australian financial market volatility.

Here’s the state of play:

  • In November, retail sales increased by 0.4%, the largest increase since April 2018.
  • Non-food sales increased by a larger 0.6%. This is regarded as being a better guide on discretionary spending patterns.
  • Many suspect the increase was driven by Black Friday and Cyber Monday sales held late in the month that may have brought forward Christmas spending into November.
  • The ABS noted online turnover accounted for 6.6% of total sales during the month — the highest level on record — bolstering the view that the increase in total sales was driven by Black Friday and Cyber Monday sales.
  • Despite lift in monthly turnover, sales growth over the year slowed sharply, falling from 3.6% in October to 2.8% in November. It was the smallest year-ended increase since May 2018. Excluding food sales, turnover increased by an even slower 1.9% from a year earlier, also the smallest gain since May 2018.
  • Today, economists expect a far weaker result in December.
  • The median forecast looks for retail sales to come in flat. Individual forecasts range from a decline of 0.5% to a gain of 0.4%. Rarely are individual forecasts this dispersed, underlining just how much uncertainty there is.
  • Pointing to downside risks, the value of credit card retail transactions processed through the Commonwealth Bank’s network fell 3.7% between the start of November to early January compared to a year earlier. Unsurprisingly, the bank is the most bearish forecaster of those surveyed, predicting a decline in turnover of 0.5%.
  • The NAB’s Cashless Retail Sales Index — an alternate spending indicator that has been reliable in the past — suggests retail turnover fell by 0.3% in December. This measure accurately predicted the pickup in retail sales seen in November.
  • Separate data from ShopperTrak revealed foot traffic into selected retail stores between Black Friday to Boxing Day was down around 9% compared to a year earlier.
  • Australian consumer sentiment — as measured by Westpac and the Melbourne Institute — fell to the lowest level since November 2017 in early January. Sentiment towards operating conditions at Australian retailers also fell to multi-year lows in December.
  • Excluding the impact of price movements during December quarter, the median economist forecast looks retail sales volumes to increase by 0.5%. Such a result would add marginally to Australian Q4 GDP growth.
  • Individual forecasts range from flat sales volumes to an increase of as much as 0.9%.
  • In December last year, the RBA said the outlook for household consumption “continued to be a source of uncertainty because growth in household income remained low, debt levels were high and housing prices had declined”. It noted that “this combination of factors posed downside risks”.
  • The December retail sales update will arrive during the RBA’s February monetary policy meeting.

The report will arrive at 11.30am AEDT.

Business Insider will have all of the details once it hits the screens.

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