- NAB’s cashless retail sales index points to another positive result when June retail sales data is released by the ABS.
- An increase would mark three straight months of retail sales growth, following flat growth in March.
- Combined with a sharp rise in consumer sentiment, recent data points provide support for the near-term consumption outlook.
Recent data points suggest that the tide may finally be turning for long-suffering Australian consumers.
Figures from NAB released this morning show the bank’s Cashless Retail Sales Index rose by 0.5% in June, following a gain of 0.6% in May (revised down from 0.8%).
The index is based on cashless spending data comprised of around 2-3 million transactions per day, and is seen as a leading indicator for monthly retail sales data from the ABS.
It’s worth noting that the relationship between NAB’s index and retail sales data has been a bit iffy in recent months. Based on the May index, NAB predicted a flat result for retail sales, which ultimately rose by 0.4%.
However, it’s another positive indicator for the retail sector, which has strung together two straight months of growth. Sales rose by 0.5% in April after a flat result in March.
“Our data mapping suggests that the official ABS measure of retail sales will rise 0.4% in June, following a rise of 0.4% in May,” NAB said.
Following the May result, Capital Economics said the recent trend points to a solid rebound in household consumption — the largest component of GDP — in the June quarter.
If June retail sales match NAB’s estimate of 0.4% growth, it will provide more evidence that household spending is at least holding up amid the combination of high household debt and low wage growth.
In the minutes to its July meeting yesterday, the RBA highlighted that it’s still closely monitoring how Australia’s debt load will affect the consumption outlook.
“Households with high debt levels are more vulnerable to economic shocks and therefore more likely to reduce consumption in the face of uncertainty about their future income,” the central bank said.
Consumers will also have to negotiate a string of mortgage rate increases by mid-tier lenders trying to combat the effect of higher bank funding costs.
However, on a more positive note for household budgets, Westpac’s monthly consumer sentiment index rose to the highest level since 2013 last week, in the wake of income tax cuts announced by the federal government.
So while the overall picture remains complex, recent evidence suggest some green shoots are appearing on the demand-side of the Australian economy.
Despite that, NAB chief economist Alan Oster pointed out that conditions in the retail industry remain challenging.
With reference to NAB’s monthly business survey released last week, “retail continues to have the lo west trend business conditions of any industry”, Oster said.
“Retail prices tracked sideways in the month, with no growth after increasing at a low rate recently.”
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