Australian retail sales fell sharply for a second consecutive month as lockdowns restricted spending opportunities and trading conditions. Turonver was down 2.3% in July driven by a heavy fall in New South Wales (-8.9%) as the lockdown tightened to see non-essential retailers closing. While there will be more weakness to come for in-store retail, there is some respite as online sales are surging having risen by 36% over the past two months.
Retail Sales — July | By the numbers
- National retail turnover fell by 2.7% for the month in July, in line with the preliminary estimate, coming in at $29.8bn. Retail spending had fallen by 1.8% in June.
- Annual turnover growth went into the negative range, swinging to -3.1% from +2.9% on the July result.
Retail Sales — July | The details
Australian retail spending was hit significantly as concerns over the Delta variant emerged and lockdowns were reimposed. These effects have since intensified through August into September. For July, sales were down by 2.7% driven by an 8.9% fall in New South Wales — the largest decline seen in any state in almost a year — as non-essential retail in Sydney was shuttered by the lockdown. Spending in Queensland (-0.9%) and South Australia (-3.3%) declined with stay-at-home restrictions being in place for short periods in the month. Victoria was up overall (1.3%), with the boost from reopening enough to counter the headwinds from lockdown 5 that was in place over the second half of July.
Coming after a 1.8% fall in June, Australian retail sales had declined by 4.4% over the past two months, equating to a loss in turnover for the sector of around $1.4bn. Retail sales were still elevated relative to their pre-pandemic trajectory, though this has been a sharp loss in momentum with more weakness to come.
The category detail highlighted the effects of lockdowns on trade. Areas benefitting from stay-at-home restrictions lifted, with food up 2.3% supported by stocking up supermarkets (2.3%) and liquor stores (3.5%). Meanwhile, online sales are soaring as in-store retail closes, with a 19.3% rise coming through in July on the back of the very strong rise in the month prior (14.3%). This has predominantly been driven by non-food sales, which have surged by 40.2% over the past two months, indicating discretionary spending is strong amid the lockdowns. Online retail sales are a stunning 98.2% higher than their pre-COVID level, and they accounted for 12.6% of total turnover in July — their highest share on record. The closures affecting non-essential retail saw clothing, footwear and personal accessories down 15.4% for the month, department stores fell 11.4%, while restrictions on dining out saw cafes and restaurants plunging by 12.3%.
Retail Sales — July | Insights
Momentum in retail sales has fallen sharply as lockdowns have restricted the ability to go out and spend. This week's national accounts showed there was strong momentum in household consumption, with accumulated saving at high levels. Strong balance sheets, low interest rates and a strengthening labour market prior to the Delta outbreaks were also key supports. All this should leave households well placed for spending to rebound when lockdowns have run their course, albeit this time around the presence of COVID in the community is a risk and at this point is an unknown.