Australian retail sales pulled back in December due to base effects as sales were unable to keep pace with their record high level in the month prior in which Victoria opened up more widely and strong demand came through over the Black Friday period, likely bringing forward some Christmas-related spending. For the December quarter, retail volumes (nominal sales adjusted for price changes) lifted by a stronger-than-expected 2.5% driven by a very sharp rebound in demand in Victoria.
Retail Sales — December | By the numbers
- Retail turnover (nominal) declined by 4.1% in December to $30.369bn, which was a touch better than the preliminary estimate of -4.2%.
- Annual turnover growth eased from its 19-year high of 13.3% to 9.6%.
- Retail volumes lifted by 2.5% nationally in Q4 (vs 1.9% expected) adding to Q3's 6.5% reopening-driven surge: this latest outturn accelerating annual growth to 6.4% from 4.2%. Retail prices were held flat in the quarter (3.3%Y/Y) with discounting for Black Friday a major weight.
Retail Sales — December | The details
After soaring in November as restrictions in Victoria were wound back and Black Friday led to a spending splurge, retail sales understandably slowed in Decemeber falling by 4.1%. However, the pace over the year is still very high at 9.6%, and the level of turnover is 9.4% above where it was before the pandemic emerged.
The breakdown of spending growth in December was reflective of the unwind from the aforementioned effects. Sales ex-food (measuring discretionary spending) declined 5.7% in the month after surging by 12.7% in November, with the pace over the year coming back to 9.6% from 15%. Household goods fell 8.3% after a 12.7% rise in November, clothing and footwear came back -9.4% from 26.7%, and department stores pulled back -12.5% from growth of 21.1% in the month prior.
December's slowdown was broad based across the nation as the next chart shows. Victoria saw the steepest decline (-6.8%mth), more likely to be reflecting volatility associated with the pandemic rather than a faster deterioration in demand relative to the other states. Annual growth across the states was still elevated across the board: New South Wales 8.2%, Victoria 6.1%, Queensland 13.6%, South Australia 9.1%, Western Australia 14.3% and Tasmania 7.6%, and so too the level of spending relative to before the pandemic.
Turning to volumes, the key theme to highlight overall was the contribution that came from Victoria. With the state opening up more than it had since early on in the year, volume growth there soared by 12.8% in Q4 turning the pace through the year positive at 1.6% from -9.8%. The rest of Australia saw demand moderate after their reopening rebounds came through in Q3. Note, however, that in level terms, volumes in Victoria now only just sit above their pre-pandemic benchmark (+1.6%) whereas they are still elevated across the rest of Australia (+8.1%) despite the softening in this most recent quarter.
The volume breakdown across the quarters in 2020 highlight the shifts in demand that have occurred in the economy. Over the first half of the year, the "stay at home" areas in food and household goods saw strong demand as the restrictions saw discretionary demand collapse. Reopenings saw this broadly reverse over the second half of the year.
The price data are more difficult to summarise due to varying effects across the sector. The large declines in Q4 (green bars in chart) in clothing and footwear and department stores reflects the impact of discounting for Black Friday sales. Meanwhile, prices in food and household goods have eased likely because the very strong demand seen by these categories brought on by shutdowns has since pared back on reopenings and supply chain constraints have resolved. The 0.8% rise for cafes and restaurants was the fastest quarterly lift in around 8 years, though this does follow a 0.3% decline in Q3.
Retail Sales — December | Insights
While retail sales pulled back in December, high-frequency data published by the major banks have been indicating that spending will bounce back again in January. The rise in retail volumes over the second half of the year speaks to the strong momentum in household consumption that had accumulated as the economy reopened and stimulus measures took effect.
