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Australian retail sales rebounded modestly in August following a shock decline in July with the ABS reporting an increase of 0.4% to $24.4044 billion, the highest level on record.

The increase, in line with expectations, followed a 0.1% drop in July that was likely caused by consumers bringing forward spending in June due to the small business tax package announced in the federal budget in May.

In seasonally adjusted terms, sales increased by 4.45% from a year earlier, an acceleration on the 4.17% pace of July.

According to the ABS, the largest contributor to the monthly increase was food retailing which rose 0.6%. Elsewhere other retailing (1.3%), department stores (1.3%) and household goods retailing (0.2%) registered gains while clothing, footwear and personal accessory retailing (-1.4%) and cafes, restaurants and takeaway food services (-0.3%) fell.

From a year earlier sales increased in all survey categories. Reflective of the hot housing markets along Australia’s eastern seaboard, household goods retailing registered the strongest growth at 9.1%. While that figure is consistent with the trend seen over the past year, there has been a noticeable change in spending patterns in other sales categories.

Having been one of the strongest performing categories in 2014, spending on cafes, restaurants and takeaway food services has slowed sharply, growing just 3.1%. Reflective of the falling Australian dollar and some strengthening in domestic labour market conditions, spending on clothing, footwear and personal accessory retailing, along with department stores, have accelerated in recent months, rising 5.9% and 7.1% respectively.

Food retailing, the largest category in dollar terms, grew by 2.9%, weighed down by price deflation as a result of a fierce supermarket war among Australia’s largest chains.

From a state and territory perspective, Victoria recorded the strongest monthly increase at 0.9%, outpacing gains of 0.5%, 0.4%, 0.3% and 0.2% in New South Wales, Tasmania, South Australia and Western Australia respectively. Sales fell in the Northern Territory (-0.9%), the Australian Capital Territory (-0.4%) and Queensland (-0.2%).

From a year earlier all states and territories, bar the Northern Territory, recorded an increase in sales. Helped by stronger economic conditions than other areas of the country and strong house price growth, New South Wales and Victoria logged the fastest annual growth at 5.8% and 4.8% respectively.

Overall the August report doesn’t offer too much in terms of new information for markets to digest. Household goods retailing continues to outperform as does New South Wales and Victoria – a pattern that has been evident over the past two years.

The market reaction is certainly reflective of this, with the Australian dollar and ASX 200 largely unchanged from where they were trading prior to the report’s release. As at 12.20pm AEST the AUD/USD buys .7035 while the ASX 200 is down 0.52% at 5085.6.

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