The early signs are looking good for Australia's next retail sales report

Don Arnold/WireImageiPhone buyers in Sydney.
  • Australian retail sales boomed in the June quarter. However, in July and August, that strength has not been sustained.
  • The spending slowdown has raised concerns that falling home prices and weak income growth may be affecting consumer behaviour.
  • The NAB’s latest cashless retail sales index points to a pick-up in spending in September. However, there are plenty of caveats attached.

With home prices falling, income growth weak and lead indicators on the outlook for hiring looking increasingly spotty, there’s increasing concern that Australian households may not be able to sustain their spending levels in the period ahead.

If so, that would remove a key pillar that helped to propel economic growth in the first half of the year.

While recent consumer sentiment readings have held up surprisingly well all things considered, recent retail sales data hasn’t been all that convincing.

Spending was flat in July, a disappointing outcome following a surge in spending in the June quarter. That result was followed up by a modest 0.3% gain in August; again, not an overly great outcome.

Another soft outcome in September would only add to concerns about the health of the largest and most important part of the economy.

Based on the National Australia Bank’s (NAB) latest cashless retail sales index, the early indications on spending are looking alright.

The NAB measure of spending is derived from around 2 million personal transactions per day using the bank’s platforms, including spending by consumers using debit and credit cards, BPAY and Paypal.

In September, the index only increased by 0.2%, the weakest growth in four months. However, when mapped to Australia’s official retail sales data released by the ABS, the news was considerably better, according to Alan Oster, Chief Economist at the NAB.

“Our data mapping suggests that the official ABS measure of retail sales will strengthen to 0.4% on a monthly basis, up from a print of 0.3% in August,” he said.

So that’s a modest acceleration in spending, at least based upon what’s been seen in the past in the official data.


While such an outcome would undoubtedly be welcomed, and mirror recent resilience in consumer sentiment surveys, it comes with a few caveats attached.

For one, the NAB index has not always correctly predicted movements in the ABS data. For example, it predicted that retail sales would be flat in August, below the 0.3% gain reported.

Secondly, in the past the release of new iPhone models has resulted in some wild swings in the ABS official data, creating havoc in trying to adjust for seasonal spending patterns.

That was seen in 2017 and could occur this year given the latest model was released in late September.

So while the NAB index points to a reasonable outcome, whether that will translate to a similar outcome in the official data remains an open question.

The ABS will release Australia’s September retail sales report on Friday, November 2.

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