- Australian retail sales have been very weak recently, declining 0.4% in December before rebounding by a paltry 0.1% in January.
- Electronic spending at the NAB points to sales growing by 0.3% in February.
- The NAB expressed caution over the strength of apparent spending last month, noting it was not confirmed by other economic indicators.
If electronic spending through the National Australia Bank’s (NAB) platforms are anything to go by, Australian retail sales, after an incredibly weak run in December and January, may have improved in February.
According to its Cashless Retail Sales Index, sales likely grew by 0.3% last month — still a weak result but far stronger than official data seen in recent months.
The NAB Index uses personal transaction data from the bank’s platforms to track electronic spending patterns. Based on around two million transactions per day, it provides an early and often reliable indication on retail spending patterns across the nation.
If the Index is correct, it may help to alleviate growing concern about the outlook for household spending — the largest part of the Australian economy — in an era of falling home prices, high levels of household indebtedness and persistently weak household income growth.
The rebound also coincides with separate data from the Commonwealth Bank that revealed economy-wide spending grew at the fastest pace in nine months in February.
While the signals in the NAB Index are positive, at least compared to recent form, Alan Oster, chief economist at the bank, cautioned there is greater-than-usual uncertainty about the February result.
“Frankly, this is at odds with other data, such as the NAB Monthly Business Survey,” he said.
“The February Business Survey found that retail remained the weakest industry in the survey by significant margin and declined further from the previous month. The retail sector remains at or close to recession levels, with consumers unwilling or unable to spend in a low wage growth and high debt environment, potentially compounded by negative wealth effects from housing.”
So Oster isn’t overly convinced the internal NAB data will be replicated when the ABS releases its February retail sales report on April 3.
Up until January, the NAB Index had an excellent track record for predicting movements in the ABS retail series. However, it forecast a 0.5% increase in turnover in January, overstating the increase in the official data of 0.1% by a significant margin.
“Combined with weakness in our other indicators, that makes us somewhat cautious about these results,” Oster said.
“In particular, there may be some downside risk to the Cashless estimate for February.”
In the minutes of the RBA’s March monetary policy meeting, board members noted that there was “considerable uncertainty around the outlook for consumption given the environment of declining housing prices in some cities, low growth in household income and high debt levels”.
It added that liaison with retailers suggested that sales had “remained stable” after weakness either side of the New Year.
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