For the third month in succession Australian retail sales have come in below expectations, casting doubt over the the ability of household spending to power economic growth in the year ahead.
According to the ABS, sales were flat in February after seasonal adjustments, well below expectations for an increase of 0.4%.
From February 2015, turnover rose 3.3% to $24.838 billion, the slowest annual increase in percentage terms since September 2013.
By category, there were gains in household goods retailing (0.4%), department stores (0.4%) and clothing, footwear and personal accessory retailing (0.1%). Food retailing, the largest category by dollar spend, was relatively unchanged while sales in cafes, restaurants and takeaway food services (-0.2%) and other retailing (-0.1%) all declined.
After recording the slowest annual growth in the 12 months to January, sales in department stores recorded the largest increase in percentage in the year to February, rising 7%. That was followed by clothing, footwear and personal accessory retailing at 6.5% while household goods retailing, having been the standout performer in 2015, slowed to 4.4%.
Spending at cafes, restaurants and takeaway food outlets recorded the slowest annual increase of all categories at 1.8%.
Sales rose in Victoria (0.4%), New South Wales (0.2%), the Australian Capital Territory (1.0%) and South Australia (0.3%), offsetting declines in Queensland (-0.4%), Western Australia (-0.6%), the Northern Territory (-1.6%) and Tasmania (-0.5%).
Reflective of the broader economic performance seen of late, non-mining states and territories continued to outperform their mining peers with sales in the ACT, New South Wales and Victoria registering gains of 7.7%, 4.6% and 4.8% respectively over the past 12 months.
At the other end of the spectrum, sales in areas exposed to the mining industry vastly under performed. Turnover in Western Australia slid 0.2% from February 2015 while small gains of 1.3%, 0.7% and 3.0% were registered in Queensland, the Northern Territory and South Australia.
Though the broader theme in the data remains intact — non-mining states and territories continue to outperform other areas of the nation — there’s little doubt that the overall trend in sales is slowing.
In each of the past three months, sales have disappointed, suggesting that households remain cautious despite strong growth in house prices and robust labour market hiring in the second half of last year, particularly in eastern states.
With house prices expected to slow further and forward-looking labour market data starting to soften, the tailwinds that helped to propel household consumption higher last last year now appear to be ebbing.
Given household spending is required to help power Australian economic growth in the years ahead, should the recent weakness in retail sales persist it will not only increase the likelihood that economic growth could undershoot expectations this year, but also the prospect of further interest rate cuts from the RBA.