Australian retail sales have missed in May.
Sales rose by 0.3%, below expectations for a gain of 0.5%, although the figure was an improvement on the 0.1% decline seen in April. Despite the miss, annual growth accelerated to 4.7% from 4.1% in April.
Food retailing (0.7%), household goods retailing (0.9%) and other retailing (0.3%) recorded increases while there were falls in department stores (-1.4%), clothing, footwear and personal accessory retailing (-0.8%) and cafes, restaurants and takeaway food services (-0.2%).
From a year earlier all categories recorded growth with household goods retailing (9.5%) and clothing, footwear and personal accessories sales (8.9%) logging the largest increases. Other retailing saw the slowest growth at 1.4%.
From a states and territories perspective sales increased in New South Wales (0.7%), Queensland (0.2%), Western Australia (0.2%), the Australian Capital Territory (0.9%) and Tasmania (0.6%). Sales were flat in South Australia and the Northern Territory while those in Victoria fell (-0.1%).
Over the past year all states and territories except the Northern Territory recorded growth in sales. The largest increases came from the ACT (7.1%), New South Wales (6.1%) and South Australia (5.5%). Those in the Northern Territory slipped 1.5%.
According to UBS economists George Tharenou and Scott Haslem, despite the acceleration in annual growth, the trend in retail sales is weakening.
“Overall, putting aside the misleading y/y strength, retail sales are actually on a weaker trend in recent months, which is disappointing given the RBA’s rate cuts in February & May appear to be providing a limited boost (at least to date). It is plausible that the coincident rebound in petrol prices is acting as a headwind, after previously providing a significant boost – while weak wages growth is also a drag. That said, the Government’s small business tax package should still provide some boost to spending in coming months”.
The pair suggest that if the trend in sales is reflective of broader household consumption, there is a growing case for additional rate cuts from the RBA.
“Looking forward, if the weaker signal from the retail data comes through to a faltering of broader consumption growth (noting that Q1-15 consumption volumes already slowed unexpectedly to 0.5% q/q), it would add to the case for the RBA to cut rates further”.