AUSTRALIAN RETAIL SALES STALL

Cameron Spencer/Getty Images for Red Bull Air RaceAustralian retail sales were expected to slow.
  • Australian retail sales were flat in July, according to the ABS, the weakest monthly result since December last year. Non-food sales — often seen as a discretionary spending indicator — fell 0.25% for the month.
  • Sales fell in a majority of Australian states and territories, masked by an usually large 0.8% gain in Queensland.
  • Over the year, total and non-food sales both rose at a faster pace than in June. However, both remained weak compared to historical standards.

Australia’s retail sales stalled in July, defying expectations for another modest monthly increase.

According to the Australian Bureau of Statistics (ABS), retail turnover was unchanged after seasonal adjustments, undershooting market expectations for an increase of 0.3%.

The surprise result followed a strong period for sales over the prior three months, including a 0.4% gain in June.

“There were falls in three of the six industries,” said Ben James, Director of Quarterly Economy Wide Surveys at the ABS.

“Household goods retailing (-1.2%) led the falls, and there were also falls in clothing, footwear and personal accessory retailing (-2%) and department stores (-1.9 per cent).

“The falls were offset by rises in other retailing (1.7%), food (0.3%) and in cafes, restaurants and takeaway food services (0.6%).”

The weakness in sales of household and personal goods could reflect the impact of falling home prices in many parts of Australia, a trend that continued last month with CoreLogic reporting that home values fell in five of Australia’s eight capital cities, and in regional areas, during August.

Indeed, excluding food sales — the largest category by dollar spend — turnover fell by 0.25% to two decimal places, partially reversing the 0.4% increase seen in June.

Non-food sales are often regarded as a better overall indication on discretionary spending patterns across the economy.

By state and territory, the ABS said sales fell in a majority of locations after seasonal adjustments.

“There were falls in Western Australia (-0.6%), Victoria (-0.2%), South Australia (-0.3%), the Northern Territory (-1.6%), the Australian Capital Territory (-0.6%), and Tasmania (-0.3%),” James said.

“New South Wales was relatively unchanged while Queensland rose 0.8%.”

Put another way, had it not been for an unusually large gain in Queensland, nationwide sales would have fallen during the month.

Despite the soft monthly result, annual growth in sales actually accelerated a touch in July, lifting by 2.9% following an increase of 2.8% in the 12 months to June.

It was the fastest increase since March this year.

Non-food sales also grew at a faster pace over the year, increasing by 2.2%, up from 1.8% in the 12 months to June.

With Australia’s estimated resident population increasing by 1.6% in 2017, according to latest population data released by the ABS, it suggests that total and non-food sales likely grew by around 1.3% and 0.5% respectively over the past year in per capita terms.

“The data confirms that it is still a very patchy environment for retailers as households continue to battle against a number of headwinds,” said Sarah Hunter, Head of Macroeconomics Australia for BIS Oxford Economics.

“Although it was a small increase, last week’s out-of-cycle mortgage rate rise by Westpac will have added to the drags being created by stagnant real wages, slow growth in other source of household income, and falling house prices in the largest cities, which will be weighing on households’ wealth and confidence.”

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