Your 10-second guide to today’s Australian retail sales report

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Australia’s retail sales report for September will be released today.

After a strong June quarter, sales have disappointed in each of the past two months, holding steady in July before lifting modestly in August.

A similar result is expected in September, partially reflecting the impact of soaring fuel prices that could cut into discretionary spending.

With Australian home prices continuing to fall, many will be looking for evidence as to whether this is starting to impact spending levels. There’s some disagreement as to whether this reduced wealth effect will impact spending, especially at a time when labour market conditions are stronger than at any point in the past six years.

Today’s release will also contain retail sales volumes, providing the first indication on household consumption in the September quarter.

Here’s the state of play.

  • In August, retail sales increased by 0.3% to $26.87 billion, in line with market expectations.
  • Thanks to a low base effect created by a 0.6% decline a year earlier, the monthly increase saw annual growth in sales lift to 3.8%, the fastest pace since May 2017.
  • Non-food sales, seen by many as a measure of discretionary spending, increased by 0.5% over the month, and by 3.4% over the year. The annual rate was the fastest increase since June 2017.
  • Food sales — the largest component by dollar spend — were unchanged from a month earlier.
  • Sales increased in a majority of states and territories, including in New South Wales and Victoria, those areas where property prices have fallen the fastest so far in 2018.
  • Today, economists expect another modest increase in retail spending in September.
  • The median economist forecast looks for a lift of 0.3%, the same pace as August. Individual forecasts range from a gain of anywhere between 0.1% to 0.6%.
  • When mapped to the ABS data, the NAB’s cashless retail sales index suggests sales will increase by 0.3%.
  • Other spending measures, such as the Commonwealth Bank’s Business Sales Indicator, suggest stronger labour market conditions helped to support spending in discretionary areas over the month.
  • Creating uncertainty over the September report, average petrol prices in Australia rose sharply during the month, carrying the potential to limit spending in discretionary areas.
  • Another factor to watch is the release of the latest iPhone model. In the past this has resulted in some wild swings in the ABS seasonally adjusted data, creating havoc in trying to adjust for seasonal spending patterns. The latest model was released in late September, not October as it was in 2017.
  • Today’s report will also contain retail sales volumes for the September quarter. This eliminates the impact of price movements over this period, and accounts for around 30% of household consumption expenditure in Australian GDP. Household consumption makes up around 55% of the Australian economy.
  • The median economist forecast looks for an increase of 0.4%. Individual forecasts range from 0.2% to 0.8%.
  • A result in line with market expectations will add just under 0.1 percentage points to quarterly GDP.

The retail sales report will be released at 11.30am AEDT.

Business Insider will have all the details once it hits the screens.