Retail sales — July | By the numbers
- Retail sales were flat in July (0.0%) at $A26.79bn vs the market forecast for growth of +0.3%. Growth in June was +0.4%.
- Annual growth lifted to +2.9% from +2.8%, which reflected a base effect from July 2017.
Retail sales — July | The details
Looking across the categories, there were sizeable declines in turnover in July for; household goods -1.2%, department stores -1.9% and clothing and footwear -2.0%.
Those declines were offset by increases from; food +0.3%, cafes and restaurants +0.6% and other goods (inc. newspapers, books, sporting goods, pharmaceuticals) +1.7%.
The annual pace of turnover for household goods slowed to +1.1% in July and has become increasingly subdued averaging +1.9% in 2018. Recent averages show a clear decline; +8.1% in 2015, +3.3% in 2016 and +2.0% in 2017. Weighing on this could be a cooling residential property market; today's CoreLogic Home Value Index for August showed property prices on a national basis recorded a decline for the 11th consecutive month.
It was also a poor month across the states in July, with growth either flat or in decline for all excluding Queensland. The results were; NSW 0.0%, VIC -0.2%, QLD +0.8%, SA -0.3%, WA -0.6% and TAS -0.3%. Also, the ACT fell -0.6% and the NT -1.6%.
Annual growth remains strongest in VIC (+5.2%) and has accounted for around 45% of the growth in retail sales on a national basis over the past year. Strong population growth has been a driving factor in this dynamic.
Completing the weakness in this update, it was also a softer month for retail sales in the online space. According to ABS' estimates, turnover from online retail fell -3% in July to $A1.42bn.
The online space accounted for 5.5% of total retail spending in July, which was down from 5.7% in June. However, the rise has been rapid — that measure sat at 4.3% in July last year.
Retail sales — July | Insights
Today's disappointing outcome highlights the weakness in discretionary spending. Removing the impact of the 0.3% rise from the food category, 'underlying' retail sales fell by -0.2% in July. Annual growth is at +2.1% having trended lower in 2018.
While employment growth has remained robust for much of the past 18-months, households are faced with headwinds from persistently weak income growth, elevated levels of debt and, more recently, declining property prices — albeit from very strong levels. In spite of those factors, retail sales were surprisingly strong in Q2 so this could be an early indication that a more moderate result is on the horizon for Q3.