Australian retail sales lifted by 1.3% in March, receiving a slightly softer-than-expected rebound after short state-based lockdowns. Retail volumes pulled back a little more than anticipated falling by 0.5% over the March quarter, with consumption patterns showing signs of rebalancing on a wider reopening of the services side of the economy.
Retail Sales — March | By the numbers
- Retail turnover (nominal) advanced by 1.3% in March to $30.7bn, coming in a touch below the preliminary and median estimate of 1.4%. Sales fell by 0.8% in February.
- Annual turnover growth decelerated from 9.1% to 2.2% on base effects.
- Retail volumes declined by 0.5% in Q1, weaker than the median estimate for a 0.4% fall. This, however, is coming from a 9% surge over the second half of last year as the economy reopened. Annual volume growth moderated from 6.4% to 4.7%. Retail prices lifted by 0.4% in Q1 to be 2.4% higher through the year.
Retail Sales — March | The details
Nominal retail sales lifted by 1.3% in March, helped by rebounds in spending in Victoria (3.5%) and Western Australia (5.5%) after short lockdowns in those states. This gave retail sales a boost into the end of the quarter after a weak start to 2021. Overall, retail sales were down 0.1% in the March quarter. There may be signs in today's report of spending rebalancing from the pandemic-induced shifts seen last year thanks to eased restrictions and more domestic travel. For example, growth in spending in cafes and restaurants was strongest of the categories in Q1 rising by 6.4%. Prominent during the more extended lockdowns of last year was very strong demand for food and household goods, but despite the many short state- or city-based lockdowns both categories saw declines in Q1.
Details for retail sales volumes reflected the effects outlined above, with cafes and restaurants surging up by 5.8% in Q1 with restrictions eased and concerns over the pandemic likely reduced due to low caseloads. Both food (-2.7%) and household goods (-1.6%) pulled back sharply in Q1: the reduced demand being consistent with less time being spent at home. Clothing and footwear fell 0.7% in Q1, though this was after the huge gains seen in the previous two quarters (34.3% in Q3 and 17.2% in Q4) driven by pent-up demand and Black Friday sales. Overall, retail volumes across most categories remained well above pre-pandemic levels, though the trajectories have either leveled out or are slowing. In particular, food is slowing sharply after it was boosted last year by households stockpiling for lockdowns. Still yet to see a return to pre-pandemic levels of demand is cafes and restaurants, which despite Q1's surge are still in recovery mode.
Retail prices were firmer in Q1 rising by 0.4%, though base effects slowed the annual pace to 2.3% from 3.3%. The chart below illustrates how price rises for food and household goods have eased over the past couple of quarters as demand for those goods has moderated. Clothing and footwear prices are recorded to have rebounded by 2.3% in Q1, though this mainly reflects prices normalising after the broad-based discounting seen in Q4 around the Black Friday period. Through the year, clothing and footwear prices are only a little higher (0.4%). Increased demand and pandemic-related precautions saw cafes and restaurants lifting prices by 0.5% in Q1 after a 0.9% rise in Q4. However, the intensity of competition likely means that the ability to pass on higher prices to customers is somewhat limited.
Retail Sales — March | Insights
The onset of the pandemic and introduction of restrictions hit the services side of the economy hard last year, prompting a shift in consumption patterns towards goods-based spending and this benefitted the retail sector. But there are now signs that spending patterns are rebalancing due to the wider availability of consumption opportunities in services areas. But it should be noted that retail spending (+10.5%) and volumes (+5.2%) are still sharply above pre-pandemic levels, highlighting the strength of household demand that is driving the recovery.