A Victorian-driven rebound in spending towards the end of the state's shutdown saw Australian retail sales 1.4% higher in the month of October. The result was a touch weaker than expected (1.6%), but the level of turnover remains elevated having been supported by the momentum generated by the reopening of the economy that was reported in this week's national accounts for Q3 (see here) and by significant policy stimulus measures.
Retail Sales — October | By the numbers
- Retail turnover (nominal) advanced by 1.4% in October to $29.552bn, coming in a touch weaker than the preliminary and market estimate of 1.6%, after falling by 1.1% in September.
- Annual growth in retail turnover lifted from a 5.6% pace to 7.1%.
Retail Sales — October | The details
National retail sales lifted by 1.4% overall for the month in October, with the key driver being a 5.1% rise coming through in Victoria (-5.8%yr) as the state started to reopen from its second pandemic-induced shutdown. Turnover growth across the rest of the nation steadied with a 0.3% rise in October, coming off a 1.3% fall in the month prior.
Overall, the level of retail sales remains elevated at around 6.4% above their pre-pandemic level reflecting the reopening effort and a very strong stimulus response that has boosted disposable incomes, while the pandemic itself has also brought on shifts in consumption patterns with a greater share of consumption going into goods away from services due to the restrictions.
Across the categories, the strongest gains came from clothing and footwear (6.8%mth) and cafes, restaurants, and takeaway food (5.4%mth), both of which received a reopening boost from Victoria where clothing and footwear sales surged by 41.7% and cafes, restaurants, and takeaway food increased by 14.9%.
Comparing turnover levels, the chart below highlights that the pandemic has had an uneven effect across the sector with the restrictions benefitting some areas (online, household goods, food) and hurting others (clothing and footwear and cafes, restaurants and takeaway food and department stores).
As previously highlighted, Victoria led the way in October with turnover in the state up by 5.1% compared to a 0.3% rise across the rest of Australia. This has put the recovery in Victoria in motion, but if the other states are any guide, there is reason to think that this is only just getting started. Retail turnover in Victoria is 7.1% below its pre-pandemic level whereas it is up by 11.3% across the rest of Australia over the period. Furthermore, high-frequency card data from some of the major banks have been showing that retail spending in Victoria has been very strong in November.
Retail Sales — October | Insights
Victoria's 5.1% lift in the month should be a sign of more to come and this is likely to help keep retail spending nationally elevated. The other factors going for retail at the moment are ongoing policy stimulus, very strong activity in the detached housing market, wider reopenings with some earlier restrictions on interstate travel being unwound recently and strong consumer sentiment as immediate concerns around the pandemic have dissipated on a low case count. However, these effects could see growth in retail sales could come back a little if it encourages more spending in services areas of consumption that were previously restricted or avoided.