- Australian retail sales were flat in March as higher spending on food offset weakness in all other categories.
Excluding food sales, and providing a better overall indication on discretionary spending patterns, turnover fell by 0.5%, partially unwinding February’s 0.8% increase.
- Retail sales grew 0.2% in volume terms during the March quarter, a result that will marginally add to Australian Q1 GDP growth.
Australia’s retail sales report for March has come in below expectations.
According to the Australian Bureau of Statistics (ABS), sales were flat in seasonally adjusted terms, coming in below the 0.2% gain forecast by economists.
February’s increase was left unchanged at 0.6%.
Despite the soft March report, annual growth in sales actually accelerated, lifting to 3.2% from 3% in February, the fastest increase since July last year.
“While there was a rise in food retailing of 0.7% in March all other industries fell,” said Ben James, ABS Director of Quarterly Economy Wide Surveys.
“Cafes, restaurants and takeaways, at 0.8%, led the falls, but other retailing (0.6%), household goods retailing (0.3%), department stores (0.5%) and clothing, footwear and personal accessory retailing (0.2%) also fell.”
The result was almost the opposite to that seen one month earlier, hinting that record Chinese tourist arrivals in February may have helped to temporarily boost spending levels during that period.
Falling residential property prices in Sydney and Melbourne, Australia’s most populous capital cities, may have been another factor that weighed on spending levels during the month.
Excluding food sales, and providing a better overall indication on discretionary spending patterns during the month, retail turnover fell by 0.5%, partially unwinding February’s 0.8% increase.
Over the year, sales ex-food grew by 2.5%, down from 3.2% in the 12 months to February.
Like the split in sales by category, the ABS said turnover also fell in four of Australia’s eight states and territories.
“There were falls in New South Wales (0.1%), Queensland (0.2%), Western Australia (0.1%) and Tasmania (0.3%),” James said.
“Retail trade in Victoria (0.2%), the Australian Capital Territory (1.5%), South Australia (0.2%) and the Northern Territory (0.1%) rose.”
Adding to the disappointing report, quarterly retail sales turnover also underwhelmed, lifting by 0.2% in the three months to March, below the 0.5% increase expected.
This figure removes the impact of price movements during the quarter, and will add marginally to Australian GDP when the March quarter report is released in early June.
It was also below the 0.8% increase seen in the final three months of 2017.
Retail sales accounts for just less than a third of household consumption in Australian GDP. Household consumption is the largest part of the Australian economy at around 60%.
In seasonally adjusted terms, the ABS said sales of food (0.7%), household goods (1.2%), clothing, footwear and personal accessories (1.1%), other goods (0.1%) and in department stores (0.1%) all increased, offsetting a 0.4% decline at cafes, restaurants and takeaway food services.
With nominal sales growing faster than volumes during the quarter, rising 0.6% and 0.2% respectively, the ABS said the implicit price deflator, or simply retail inflation, increased by 0.4% in seasonally adjusted terms over the quarter.
“Today’s release suggest that total real consumption growth slowed from 1.0% in Q4 to about 0.5% in Q1, and we expect it will remain around this pace for some time yet due to weak wage growth and a soft housing market,” said Kate Hickie, Economist at Capital Economics.
However, while not a great sign for household consumption, Hickie says it’s still likely that Australian economic growth accelerated in the March quarter.
“Non-retail spending probably held up a bit better,” she says.
“The weakness in consumption in Q1 appears to have been more than offset by improvements in net trade and private investment.
“GDP growth may still have accelerated from 0.4% in Q4 to around 1.0% in Q1.”
We’ll find out more information on Australia’s growth trajectory in the weeks ahead as the ABS releases data on business investment and inventories, government consumption and investment, along with construction activity, for the March quarter.
Australia’s Q1 GDP report will be released on Wednesday, June 6.
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