Australian retail sales underwhelmed for a second consecutive month in January, casting doubt on whether the resurgence in household spending seen in the second half of 2015 will be sustained in the quarters ahead.
According to the ABS, sales increased by 0.3% in seasonally adjusted terms, missing expectations for a gain of 0.4%. Sales in December came in flat, recording the weakest monthly performance seen since July last year.
While the increase was enough to see monthly turnover hit a record high of $24.835 billion, the annual pace of sales slowed to 4.0% from 4.15% in December.
As the chart below reveals, the annual rate of growth, while volatile, now appears to be trending lower.
Sales rose in other retailing (1.4%), household goods retailing (1.0%), cafes, restaurants and takeaway food services (1.0%) and clothing, footwear and personal accessory retailing (0.1%). Offsetting those gains food retailing, the largest component of sales by dollars spent, fell by 0.2%, while department stores sales slumped 1.3%.
Over the year household goods retailing, fitting with the strength of Australia’s east coast property market, recorded the fastest annual percentage increase in sales at 6.0%. At the other end of the spectrum, department store sales rose by a paltry 1.1%.
By region, sales rose in the Northern Territory (1.3%), Tasmania (1.0%), the ACT (0.7%), New South Wales (0.5%), South Australia (0.4%) and Western Australia (0.2%). Those in Victoria came in flat.
From 12 months earlier the territories, as opposed to the states, were the star performers.
Sales in the ACT rocketed by 8.5%, outpacing a 5.5% increase in the the Northern Territory. The performance of the latter is impressive given annual sales growth spent much of the second half of last year languishing in negative territory.
Those in New South Wales and Victoria, the largest states in terms of population, rose by 5.2% and 4.9% respectively.
Western Australia, the state most exposed to the mining infrastructure downturn, saw sales rise by just 1.2% from 12 months earlier.
While they have now disappointed for two straight months, the fact that sales actually increased in January is remarkable in itself given the carnage in the nation’s stock market, along with concerns over a steep deceleration in house price growth that were prevalent at the time.
At this point it’s far too early to declare the strength in household spending over, although a continuation of the pattern in the months ahead would certainly raise some concerns.
With the RBA banking on continued strength in the labour market and household spending to power economic growth this year, the recent tax debate surrounding housing, along with the upcoming federal budget, have the potential to see consumers reign in spending.
We’ve already seen consumer confidence take a hit over the recent tax debate. Let’s hope both sides of politics take heed given early signs of weakness.
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