Retail Trade — September | By the numbers
- Growth in retail spending increased by 0.2% in September to $A26.893bn, which was below the median forecast for a 0.3% rise. Turnover growth in August was 0.3%.
- Annual growth in spending was unchanged, after allowing for revision, at 3.7%
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- Retail sales volumes growth slowed to 0.2% in Q3 (from a revised pace of 1% in Q2), which was softer than the 0.4% increase expected by markets.
- In annual terms, volume growth eased from a revised 2.4% pace to 2.2%
Retail Trade — September | The details
Analysis of September's data highlights the soft nature of this update. Total retail spending increased by just 0.2%, or $43.7m, to $26.893bn. That increase was driven by spending on food, which increased by 0.4%, or $47.1m, to offset weakness in the discretionary areas of consumer spending. Removing the impact of food sales, discretionary retail spending growth was flat in September.
Across the categories, spending declined in September on clothing and footwear (1.2%), while growth was flat for household goods, department stores, and 'other' retailing (pharmaceuticals, books and stationery etc). There was, however, a 0.5% increase in spending in cafes, restaurants and takeaway food. These trends were also largely evident over the quarter.
Looking across the states, sales growth was subdued in September led by Tasmania (+0.8%), which accounts for only around 2% of national retail spending. Next best was Victoria at +0.7% (around 26% of national spending). There was modest growth in Queensland (+0.4%) and South Australia (+0.3%), while Western Australia was flat. Spending in New South Wales, which accounts for the largest share of national retail spending, declined by 0.4% — its sharpest monthly fall since December last year.
Spending growth over the quarter was also led by Tasmania (+1.3%), followed by Victoria (+1%), Queensland (+0.9%), South Australia (+0.7%), New South Wales (+0.5%). Western Australia saw a 0.7% fall in Q3.
Turning to volumes, which reflects quantities of goods sold, there was broad-based weakness in the quarter, with; department stores -0.8%, household goods -0.7%, and clothing and footwear -0.6%, while food was unchanged. Increases in 'other retailing' (+2.2%) and cafes, restaurants and takeaway food (+1.2%) were enough to drive the overall rise in volumes of 0.2%.
Retail prices, which can impact sales volumes, remain subdued rising by 0.4% in Q3 to be up by just 1.2% across the year. Food prices drove this result with a 0.7% rise. Cafes, restaurants and takeaway food lifted by 0.5%, while clothing and footwear rose by 0.3% — its first quarterly price increase since March 2017. Discounting, however, remains in department stores (-0.2%) and household goods (-0.3%).
Retail Trade — September | Insights
This was a soft update with both spending and volumes coming in below expectations. Given that volume growth was strong in Q2 at 1% a softer outcome this quarter is not overly surprising. However, annual growth in volumes has largely tracked sideways over the past year or so despite weakness in prices. Likely factors weighing on retail demand are slow wages growth, softening property prices and strong price rises from non-discretionary areas such as utilities, fuel, and private health insurance premiums.
Overall, household consumption holds the key to the outlook for growth in the domestic economy. While retail sales account for around 30% of total household consumption, with spending on services covering the balance, it does provide an early indication for a softer contribution to economic growth from the household sector in Q3. Household consumption led economic growth in Q2 contributing 0.4ppt towards the overall 0.9% increase.
