- Australian retail sales grew by 0.4% in April, according to ABS data.
- Separate spending indicators from the CBA and NAB suggest retail sales were weak in May.
- Retail sales is one of the largest components in the Australian economy.
Australian retail sales rose 0.4% in April, a noticeable improvement after a flat result in March.
The question now is whether the improvement can be sustained.
While we won’t know the answer until the Australian Bureau of Statistics (ABS) releases its May retail sales report early next month, the early signs are not promising.
The Commonwealth Bank’s Business Sales Indicator (BSI) — a measure that tracks electronic nominal economy-wide spending — grew by just 0.3% in trend terms, the weakest result in over a year.
Spending fell by 0.1% in New South Wales, and grew by just 0.2% in Victoria, potentially reflecting recent weakness in the Sydney and Melbourne housing markets.
On top of that weak result, the National Australia Bank’s Cashless Retail Sales Index — capturing electronic spending on retail goods through NAB platforms — was also soft last month.
It increased by 0.8%, an outcome that Alan Oster, Chief Economist at the NAB, says points to a weak ABS retail sales report.
“Our data mapping suggests that the official ABS measure of retail sales will be flat in May following the stronger-than-expected 0.4% in April,” he said following the release of the NAB index today.
“While the monthly data are volatile, our latest monthly business survey also showed a pull-back in overall business conditions in May after reaching historical highs in April.
“The National Accounts also reported soft consumption growth in Q1, reinforcing our caution about the outlook for the consumer.
“This reflects several headwinds including rising energy costs, low wages growth, stalling growth in housing wealth and high debt levels.”
The NAB Cashless Retail Sales Index gained 0.8% in May on a month-on-month basis, following a flat read in April (revised from -0.6%).
The NAB index 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.
It says it’s “reasonably assumed to be representative of aggregate non-cash retail sales in Australia given its large sample size”.
Reflective of broader trends in cashless spending across Australia, in other words.
While the NAB index failed to predict the rebound in sales in April, it has acted as a reliable lead indicator in the past. Combined with the softness in the Commonwealth Bank’s spending series, it suggests the risks to the ABS May retail sales report could be to the downside.
Retail sales accounts for around a third of household spending in Australia. Household spending is the largest part of the Australian economy at just under 60%.
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