After jumping 1.2% in November — the largest increase since January 2013 — Australian retail sales may have fallen in December.
That’s the finding of the National Australia Bank’s (NAB) Cashless Retail Sales Index — an indicator that has a reasonable track record for predicting movements in the Australian Bureau of Statistics (ABS) official retail sales reports — with spending patterns from the NAB’s customer base pointing to a decline of 0.3% in December.
“The NAB Cashless Retail Sales Index shows a slowdown in December following a strong November,” says Alan Oster, Chief Economist at the NAB.
“Mapping through to the official measure of retail sales suggests a decline of 0.3% in December after a strong 1.2% rise in November.”
This chart from the NAB shows the relationship between the NAB’s Index and the ABS’ official retail sales measure.
While, on the surface, a decline in sales of 0.3% would be seen as a disappointing outcome, Oster says there’s reason for caution when interpreting recent movements in sales figures.
“This is due to changing seasonal patterns,” he says, pointing to the growing influence of Black Friday sales in Australia and the timing of the latest iPhone release which impacted the ABS’ November retail sales report.
Looking through the volatility created by these events, Oster says the underlying trends point to an improvement in spending levels after a period of weakness in the September quarter last year.
“Averaging November and December suggests a moderate pace of growth in recent months — 0.45% monthly growth in the NAB Cashless Retail Index and a prediction for an average 0.3% monthly growth in the ABS data,” he says.
“This suggests some improvement in the underlying pace of growth in the fourth quarter following a slowdown in the third quarter of 2017.”
Oster says this is consistent with strong levels of employment growth seen in Australia last year, lifting by over 400,000, the strongest increase over a calendar year on record.
“This appears to be supporting not only consumer confidence but also spending, even though wages growth is exceptionally low,” he says.
Based off spending patterns from the NAB’s customer base using debit and credit cards, BPAY and Paypal, the Cashless Retail Sales Index is used to gauge broader spending patterns across the Australian economy.
With around two million transactions going through each and every day, NAB says it is “reasonably assumed to be representative of aggregate non-cash retail sales in Australia given its large sample size”.
The ABS will release Australia’s December retail sales report on February 6.