Retail Sales — May | By the numbers
- Turnover growth increased by 0.1% in May to $A27.343bn, which underwhelmed expectations for a 0.2% lift. Spending declined by 0.1% in April.
- The annual pace of retail sales slowed to 2.4% from 2.8% over the year to April.
Retail Sales — May | The details
May's report showed contrasting detail. Turnover in food retail (around 40% of total retail spending) declined by 0.3% in the month and was the main weight on the headline growth figure of 0.1%. Removing the impact of the food category, retail spending lifted by 0.4% in the month. In through the year terms, total turnover growth at 2.4% continues to outpace sales ex-food at 1.8%.
Taking a closer look at the discretionary categories; household goods lifted by 0.5% (-0.8%Y/Y), 'other' retail (sporting goods, pharmaceuticals and newspapers etc) gained 0.6% (+4.4%Y/Y) and cafes and restaurants increased by 0.7% (+4.2%Y/Y). These rises were moderated by declines from clothing and footwear -0.2% (+1.1%Y/Y) and department stores -0.4% (-1.4%Y/Y).
On a state basis, the clear standout is the weakening that has occurred in New South Wales -- spending in the nation's most populous state declined by 0.1% in May and the annual pace has fallen to its lowest since early 2012 at 0.5%. Conditions have also slowed in Victoria over the past 6-9 months but are holding up overall. May's increase of 0.6% more than offset last month's 0.4% decline, while the annual pace lifted from 3.7% to a still modest 4.2%.
The outturns from the other states were mostly weak with declines in Queensland -0.3% (+4.7%Y/Y), Western Australia -0.2% (+0.4%Y/Y) and Tasmania -0.4% (+0.6%Y/Y). However, South Australia posted a rise of 0.5% in May to be up by 2.9% over the year.
The chart, below, highlights that national retail sales growth over the past year has been held up by Victoria, Queensland and South Australia, with those states cumulatively accounting for around 53% of nationwide spending. However, the slowing in New South Wales (around 32% on national sales) has been a strong headwind for the sector.
Sales through online channels on a national basis lifted by 10.7% in May according to the ABS' latest estimates following a 2.1% fall in April. As a percentage of total retail spending, the online space accounted for 6.2% of May's turnover compared with 5.6% from a year earlier.
Retail Sales — May | Insights
Conditions in Australia's retail sector continue to slow, driven largely by a weakening in New South Wales in response to the downturn in the state's residential property market and ongoing low wages growth. Furthermore, weakness persists for retailers in household goods and department stores indicating the impact from lower transaction volumes in the housing market. So far in Q2, nominal spending growth is little more than flat. The impact of the RBA's June and July rate cuts and the federal government's increases to the low and-middle-income tax offsets are positives for the consumer spending outlook for the second half.
