Australia’s retail sales report for May will arrive later today.
Retail spending has been weak over the past year, largely reflecting weak growth in household incomes and intense competition among retailers. Strong population growth and robust hiring over this period has done little to lift spending levels.
In what was an otherwise optimistic assessment on the Australian economy from the Reserve Bank of Australia (RBA) in its July monetary policy statement, household consumption, of which retail sales accounts for around 30%, remained the chief area of concern.
“One continuing source of uncertainty is the outlook for household consumption,” the RBA said.
As such, it means that retail sales reports have increased in importance, helping to determine whether economic growth is likely to remain above 3% both this year and next as the RBA is currently forecasting.
Without a pickup in household consumption, that’s unlikely to be achieved.
Here’s the state of play.
- In April, retail sales rose by 0.4%, slightly above expectations for a smaller increase of 0.3%.
- Stronger spending in non-clothing categories offset declines in clothing and department store sales.
- Excluding food sales, and providing a better indication on discretionary spending patterns, turnover increased by 0.5%, largely reversing a 0.6% drop in March.
- Sales increased in all states and territories except for South Australia.
- Despite the stronger-than-expected April result, annual growth in sales slowed, falling to 2.6% from 3.2% in March. Sales ex-food grew by slower 2.1% over the year, decelerating from 2.4% in March.
- Today, economists expect sales to moderate slightly from the levels seen in April.
- Of the 23 polled by Bloomberg, the median forecast looks for an increase of 0.3%. Individual forecasts range from an unchanged reading to a gain of as much as 0.6%.
- Separate spending indicators from the National Australia Bank and Commonwealth Bank both suggest spending levels were weak during the month.
- The Westpac-MI Australian consumer sentiment index also remains at levels that are “not typically associated with a robust consumer”.
- Of note, Australia’s median capital city home price fell 0.3% in the three months to May, led by declines of 0.9% and 1.2% in Sydney and Melbourne respectively.
- Arriving alongside the retail sales report, the ABS will also release Australian trade data for May. The median forecast looks for a surplus of $1.2 billion, up from $977 million in April.
- Trade made a significant contribution to Australian economic growth in the March quarter, and is expected to do so for some quarters yet as LNG exports ramp up. This also means markets are paying closer attention to the report.
Both the retail and trade figures will arrive at 11.30am AEST.
Business Insider will have all the details as soon as they hit the screns.