Australia's next retail sales report could be pretty weak after a surprise surge in February

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  • Australian retail sales jumped by 0.8% in February, the largest increase in over a year.
  • The NAB’s latest cashless retail sales index suggests that result is unlikely to be repeated in March.
  • It points to an increase in sales of 0.3%, with downside risks.
  • Australia’s official retail sales report for March will be released on May 7, the same day the RBA will announce its next interest rate decision.

Australian retail sales jumped by 0.8% in February, the largest increase in over a year.

According to the National Australia Bank’s (NAB) cashless retail sales index — an alternate measure on retail spending that has a fairly good track record for predicting monthly movements in the official ABS measure — the surprise rebound in February is unlikely to be repeated in March.

“We forecast that ABS retail trade for March will grow moderately, up 0.3% on a month on month basis,” said Alan Oster, Chief Economist at the NAB.

“The strong ABS print [in February] was underlined by a particularly strong result for department stores and food, which, on our data, did not continue in March.”


So sales growth, while not terrible, is likely to slow quite sharply when the ABS releases Australia’s official retail report on May 7, coincidentally the same day the Reserve Bank of Australia will announce its next monetary policy decision.

As for the risks to the NAB’s 0.3% forecast, Oster said they are slanted to the downside, rather than upside.

“If it turns out that the February ABS print overshot, there is something of a downside risk,” he said. “Other NAB data, such as the Monthly Business Survey, continue to show challenging conditions for the retail sector.”

Oster said the expected March result is likely to be more reflective of the broader trend in retail spending this year.

“Our outlook… ultimately sees the consumer still struggling with their cash-flow and hence with any discretionary spending,” he said.

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.

In February, the NAB index pointed to an increase in sales of 0.5%, below the 0.8% level reported in the official data.

While it points to a moderation in sales growth in March, economy-wide spending grew by 0.7% in March, according to separate data from the Commonwealth Bank, the fastest increase in over 12 months.

Recent consumer confidence readings from Westpac and ANZ Bank have also improved, providing tentative evidence that the household-led slowdown in the Australian economy in the second half of last year may be starting to ease or even reverse.

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