Australian retail sales bounces back

Confessions of a Shopaholic/ IMDb.

Retail sales in Australia grew by 1.0% in April in seasonally-adjusted terms, coming in well above forecast growth of 0.3%.

It’s a strong result for the sector, after falls in three of the past four months although some seasonal factors likely contributed to the result.

The data in April follows a decline in March, when retail sales fell by 0.2%, which was revised downwards from the initial reading of -0.1%.

The Australian dollar rose immediately following the data release, but has since retreated back below US74 cents after Chinese manufacturing data came in weaker than expected.

The retail sales report measures changes in dollars spent on retail goods from one month to the next.

Gains in April were led by a turnaround in department store sales, which rose by 2.5% after leading declines in March with a -0.6% fall.

According to Westpac’s Matthew Hassan, the gain in department stores sales was the best 3-month result since 2015. However, he noted that “the timing of sales can throw around seasonally adjusted sales estimates month to month”.

The Australian Bureau of Statistics (ABS) also reported increased sales in all the major categories. Food retailing rose by 1.2% after falling by 0.5% in March, and cafes, restaurants and takeaway food services rose by 1.1%.

Although April figures were strong, JP Morgan economist Tom Kennedy said that one good reading doesn’t alleviate the main concerns in the economy centred around low wage growth, below-trend projections for GDP and tough trading conditions in the retail sector.

Westpac’s Hassan said that the increase in food retailing was likely caused by higher prices for fruit & vegetables stemming from supply disruptions due to Cyclone Debbie.

He added that the 1.2% gain in that category may give the April results a favourable skew, given that food retailing makes up about 40% of retail sales.

There were also gains in other retailing (0.6%), household goods retailing (0.4%) and clothing, footwear and personal accessories (0.3%).

On a state-by-state basis, Queensland led gains among all states with a 2.4% rise in sales. Increases in other states ranged from 0.1% (New South Wales) to 1.8% (Northern Territory).

That follows falls of 1.8% and 1.3% in March for the Northern Territory and Queensland respectively.

Kennedy said that the large increase in Queensland “suggests that replacement buying following the recent floods/cyclone activity may have temporarily lifted the numbers”.

He also said that a shift in the timing of the Easter holidays may have had some influence on the seasonally-adjusted results, noting that the ABS’s trend measurement recorded growth in April of just 0.1%.

Westpac’s Hassan was broadly positive about the result.

“Overall the result is considerably better than feared, confirming temporary impacts from weather events were a factor in March and suggesting underlying conditions have improved somewhat,” he said.

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