Retail Sales — February | By the numbers
- Turnover on a national basis increased by 0.5% in the month (seasonally adjusted) to $A27.755bn; coming in above the consensus estimate of 0.4%. Sales in January declined by 0.3% as the summer bushfires curtailed activity.
- In annual terms, turnover growth slowed from 2.0% to 1.8% to a 28-month low.
Retail Sales — February | The details
In last month's review, we covered how the summer bushfires weighed on retail spending in January (-0.3mth) as trading hours were disrupted and the related smoke haze kept people indoors. Just as that crisis was dissipating another one in the form of the covid-19 outbreak was on the horizon. The effect of the latter was to some extent evident in February's report as turnover rebounded by 0.5%, which was led by the food category (0.8%mth) as consumers began to stockpile.
Consistent with this, monthly turnover growth in supermarkets and grocery stores advanced from 0.4% to 1.1% in February; its strongest monthly rise since April 2018, representing a sizeable pick-up considering the segment accounts for around 34-35% of total retail spending in Australia. Other patterns that appeared consistent with covid-19 were; pharmaceuticals, cosmetic and toiletry goods (2.2%mth) posting their strongest month rise since June 2015; and cafes and restaurants remaining weak post bushfires (-0.4%mth) as demand for takeaway services continued to strengthen (+1.0%mth).
Outside of these effects, spending on household goods (0.7%) and in department stores (3.1%) advanced, but clothing and footwear declined for a third straight month (-2.9%) to be down by 2.3% over the year and contracting at its sharpest annual pace since September 2011. This segment saw a strong rise in November (3.6%) due to Black Friday sales but it has unfortunately been a period of weakness since for those retailers.
Switching to the state details, outperformance relative to the national result (0.5%mth) came through from Western Australia 1.2% (2.4%yr) and Queensland 0.8% (4.8%yr), with Victoria in line at 0.5% (2.5%yr) ahead of South Australia at 0.4% (0.9%yr) followed by a notably soft outturn in New South Wales of 0.0% as annual growth in the state fell to its weakest in 8 years (-0.8%).
Turnover was also flat in Tasmania in the month, though it remained in first place for the fastest annual pace of retail sales growth in the nation (6.1%yr).
Retail Sales — February | Insights
A slightly better-than-expected result in February relative to the ABS's preliminary estimate and market consensus (both 0.4%), though that means very little at this extremely difficult juncture for the retail sector, both at home and offshore, that is being battered by covid-19 as governments have brought in necessary but perversely destructive measures to limit the spread of the outbreak, manage the demand placed on health systems and keep citizens safe. The depressing reports of widespread job losses from some of the nation's major retailers and forced closures of restaurants and cafes (outside of takeaway) are a testament to that. Clearly, demand has risen very strongly in certain areas of the sector such as supermarkets, pharmaceuticals, liquor stores (and possibly also hardware) but the headwinds are immense. More optimistically, recent measures by the Federal government to provide financial support to businesses and households could help drive growth in retailers' online platforms in the months ahead.
