Australian retail sales have been pretty terrible recently.
According to data from the ABS released last Friday, sales were unchanged in September in dollar terms, leaving total spending over quarter down 0.3%, the weakest result in seven years.
However, while few disagree that sales have been weak since the end of June, falling in both July and August, economists at the National Australia Bank (NAB) think there was another factor behind the continued weakness in September.
The later-than-usual release of the the latest iPhone model, the X.
“[The] release of the iPhone X is later than previous years’ usual September release, leading to a lull in spending this September,” says Ivan Colhoun, Chief Markets Economist at the National Australia Bank.
“Excluding the effected sub-categories it suggests retail sales might have inched higher by 0.2% after two negatives so still weak but with a glimmer of light.”
As a result of the later-than-usual release data, Colhoun says retail sales in October and November could be skewed higher depending on the size of purchases of the new product, noting that pre-sales of the iPhone last year likely contributed to a 1.0% bounce in total sales during September.
This chart from the NAB shows monthly Australian retail sales less spending at electrical stores and recreational retailers, two categories that capture most mobile phone sales.
As Colhoun suggests, if not for the impact of the later release date, total sales may have grown by around 0.2% in September.
More broadly, he says there are a number of factors that explain the recent weakness in sales.
“There are a number of possible explanations why consumers may have become more cautious beyond the general backdrop of slow wages growth, namely talk of interest rate increases next year, sharply higher gas and electricity prices from July and, more recently, higher petrol prices,” he says.
Colhoun says that uncertainty related to the dual-citizenship saga in Federal politics may have been another factor that negatively impacted spending levels.
And given the importance of household consumption on the outlook for Australian economic growth, Colhoun says upcoming consumer-related data will warrant close monitoring.
“The data will need to strengthen in coming months for markets to believe that the RBA will be able to lift interest rates next year,” he says.
It will be interesting to see what the Reserve Bank of Australia (RBA) has to say on the recent bout of retail weakness when it releases its November monetary policy statement 30 minutes before the horses jump in tomorrow’s Melbourne Cup.
In October, the RBA said that “slow growth in real wages and high levels of household debt are likely to constrain growth in household spending”.
On recent evidence, it appears those constraints have been exacerbated by higher energy costs, too.