• Australian retail sales grew by 0.1% in January, a weak result after a 0.5% drop in December
  • Annual growth in sales slowed to just 2.1%
  • The poor report casts doubt as to whether the strong rebound in sales volumes in the final three months of 2017 will continue in the current quarter.

Australian retailers did not enjoy a strong start to the year with sales coming in well below market expectations.

According to the Australian Bureau of Statistics (ABS), sales grew by just 0.1% to $26.23 billion in January in seasonally adjusted terms, well below forecasts for an increase of 0.4%.

The increase matched the lowest individual forecast offered by economists, and followed a large 0.5% decline in December.

Without rounding, the January result was even weaker, increasing by just 0.075%.


“There were offsetting movements by industry with rises in other retailing (1.0%), household goods retailing (0.1%), and cafes, restaurants and takeaways (0.1%) being offset by falls in clothing, footwear and personal accessories (-0.7%) and department stores (-0.6%),” said Ben James, director of Quarterly Economy Wide Surveys at the ABS.

“Food retailing was relatively unchanged.”

Excluding food sales, and providing a better guide on discretionary spending patterns, turnover also increased by 0.1% after plunging 1.4% in December.

Mirroring the performance by category, the ABS said sales rose by 0.4% in Queensland and 0.3% apiece in Victoria and Western Australia, largely offsetting declines of 0.2%, 0.5% and 0.6% respectively in New South Wales, the Northern Territory and South Australia.

Turnover was flat in the ACT.

With sales barely growing over the month, the annual increase slowed from 2.5% to 2.1%, the weakest result since October 2017.

Excluding food, annual growth in sales also fell from 2.2% to 1.8%.

“The weak start to the quarter means that even if retail sales were to rise by a more respectable 0.4% in both February and March, the probable rebound in real consumption growth in the fourth quarter probably won’t be repeated,” said Kate Hickie, Australia and New Zealand economist at Capital Economics.

“Looking further ahead, with wage growth likely to remain subdued and the housing market continuing to slow, we expect consumption growth will continue to struggle this year.”

The weak January sales report comes as policymakers at the Reserve Bank of Australia (RBA) are about to announce their latest interest rate decision.

When the bank last met in February, it said information it received pointed to “moderate growth in retail sales [in January] and confirmed that competition in the retail sector remained strong”.

It added that “one continuing source of uncertainty is the outlook for household consumption”.

Given January’s retail sales report, and following a disappointing result in December, it’s likely that assessment will remain the same.

It also raises questions as to whether the rebound in retail sales volumes in the December quarter will be replicated in spending on services, the largest part of household consumption at around 70%.

That question won’t be answered until Australia’s Q4 GDP report is released tomorrow.