Retail Trade — August | By the numbers
- Retail sales in August increased by 0.3% to $26.867bn, which was in line with the market forecast (prior 0.0%m/m).
- Annual growth increased to 3.8% from 2.8%, although that was driven by a base effect after retail sales hit a weak spot in Q3 last year.
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Retail Trade — August | The details
Despite the headwinds faced by households from slow income growth and declining property prices, August's report was encouraging as it showed that the discretionary areas drove the headline increase of 0.3%.
Food retailing — the largest component of retail turnover at around 41% — was flat in August. Excluding the food category, turnover growth was 0.5% for the month.
The granular detail in August, shown in the chart, below, was; food 0.0% (4.3%Y/Y), household goods 0.2% (2.2%Y/Y), clothing and footwear 0.8% (4.0%Y/Y), department stores 0.9% (2.0%Y/Y), other 0.4%m/m (3.4%) and cafes and restaurants 0.7% (5.0%Y/Y)
Helping to strengthen discretionary consumption, spending in cafes and restaurants and takeaway food has been lifting over recent months. Annual growth is now at 5%, which compares to the average of 2.9% since August 2017.
Turnover growth across clothing and footwear and department stores remains subdued but looks to be improving gently.
The household goods category, which includes items such as furniture, electrical goods and hardware, and gardening supplies, is often viewed as a proxy for residential property market conditions. Turnover growth in household goods has been subdued over the past year or so fitting with CoreLogic's Home Value Index, which earlier this week showed national property prices declined for the 12th straight month in September.
On a state-by-state basis, turnover growth in August was strongest in South Australia (0.8%), followed by Tasmania (0.6%) and New South Wales (0.5%). Subdued outcomes were recorded in Victoria (0.2%), Queensland (0.1%) and Western Australia (flat).
Annual growth is now fastest in Tasmania (6.2%) — its best result in nearly 4-years — while conditions remain strong in Victoria (5.9%), which continues to drive national retail spending.
The ABS also reported that online retail spending increased by 4.4% in August, and by 28.8% over the past 12-months. Accordingly, the ABS estimates that the online space accounted for 5.6% of total retail spending in August, which is 1ppt above where it was a year ago.
Retail Trade — August | Insights
Overall, August's report was a modest result; sales growth of 0.3% for the month was in line with the average for 2018. An improving labour market and strong population growth are factors supporting retail spending, although there are ongoing headwinds from declining property prices and persistently slow income growth, while household saving is at a very low 1% giving reason for caution on the outlook.
