Australian retail sales may have staged a comeback

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  • Australian retail sales tanked by 0.4% in December, rounding off what was another weak quarter for spending at the shops.
  • Recent data suggests sales may have rebounded modestly in January.
  • The NAB’s cashless retail sales index points to an increase in the ABS measure of 0.3% in January.
  • This measure has been a reliable lead indicator for changes in retail sales over recent months.
  • The RBA says “uncertainty about the recent momentum of consumption and factors affecting households’ future consumption decisions remain a key risk for the domestic economic outlook”.

After a shock decline in December, the early signs for Australian retail sales in January are looking far less dire.

According to the Commonwealth Bank’s Business Sales Indicator (BSI), economy-wide spending last month accelerated noticeably, recovering after a slowdown in the second half of 2018.

And now the National Australia Bank’s (NAB) cashless retail sales index is also pointing to a recovery in spending over the same period, according to the NAB’s Chief Economist Alan Oster.

“The NAB cashless retail sales index, which generally grows faster than the ABS retail sales measure, gained 0.6% in January,” he said.

“[Mapped to the ABS retail sales data], we forecast ABS retail trade to increase 0.3% in January.

“That is, broadly flat over the Christmas and New Year period.”


So, a reasonable outcome over the month, but not for the key Christmas trading season. That means the champagne corks shouldn’t be popped just yet.

“The overall picture is of a sluggish retail sector,” Oster says.

“This is reflected in other data, such as the NAB business survey. In January conditions in the retail sector continued to weigh most on the business conditions index, and the industry continuing to be the only to record negative conditions. Surveyed sub-industry data suggest that conditions are now negative across all categories of retailing.

“The retail sector remains close to recession levels, with consumers unwilling to spend in a low wage growth and high debt environment, potentially compounded by negative wealth effects from housing.”

The NAB index uses personal transaction data from 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.

It has been an excellent lead indicator for the ABS retail sales measure recently, meaning the recovery reported in January is noteworthy.

We’ll find out whether the NAB index is on the money again when the ABS releases Australia’s January retail sales report on March 7.

The RBA will be hoping it is, acknowledging that “uncertainty about the recent momentum of consumption and factors affecting households’ future consumption decisions remain a key risk for the domestic economic outlook” during its February monetary policy meeting.

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