May retail sales for Australia are out and it is a terrible number.
Sales fell 0.5% month-on-month, seasonally adjusted. Earlier this week the market expected 0.1% growth.
The fall follows a collapse in consumer sentiment that started in April, triggered by leaks around the severity of the government spending cuts in the federal budget.
The warm winter no doubt had an impact on the seasonal factors, and it explains some of the big 0.5% fall. Clothing was down 2% and “footwear and other personal accessory” retailing was off 2.9%.
But the key point about this data is that May’s decline in sales comes on top of a 0.1% fall in April and a flat result in March.
This means economic momentum was already slowing and as RBA Governor Stevens said in Tuesday’s statement after the Board meeting and again in his speech today – Q1 economic strength was, or is, an apparition.
So the budget hit sentiment and now spending it seems at a very fragile time.
Indeed the data shows that the 12 month rate of change on retail sales has clearly slowed and the 3 month rate is sharply lower also.
Given this data is now a month old and given consumer sentiment has not rebounded in any significant way the risk is that the retail sales sector is faced with more weakness in the months ahead.