Australian retail sales volumes fell by 4.4% in the September quarter, the largest quarterly contraction on record as many retailers were closed during the lockdowns in New South Wales and Victoria. The start of the easing of restrictions saw retail sales return to growth by the end of the quarter, with turnover rising by 1.3% in September.
Retail Sales — September | By the numbers
- Retail turnover (nominal terms) lifted by 1.3% in September to $29.7bn, in line with the preliminary estimate. Turnover fell by 1.7% in August.
- Year-on-year growth turned positive on this outcome, rising to 1.7% from -0.7%.
- Retail volumes (real terms) contracted by 4.4%q/q against expectations for a larger fall of -5%. Volume growth through the year fell to -2.2% from 8.8%. Retail prices were near flat in Q3 (0.1%) due to discounting associated with the lockdowns.
Retail Sales — September | The details
The Delta lockdowns led to a 4.4% contraction in retail sales volumes in Q3, exceeding the decline seen at the outset of the pandemic. This was driven by a very large decline in New South Wales (-11.6%q/q) where restrictions on retail trade were tighter than compared with the 2020 national lockdown, while Victoria also posted a sizeable fall (-4.5%q/q) as the lockdown there became more stringent. The chart below illustrates that the Delta lockdowns had a much more severe impact on the sector in New South Wales than during the first wave of Covid. Retail volumes advanced in the other states that remained open: Western Australia (4.1%), Tasmania (2.2%) and South Australia (1.7%), but growth in Queensland was flat (0.2%) after a short lockdown in the capital city.
Looking at the category details, the effects of the lockdowns in New South Wales and Victoria crunched discretionary (non-food) retail, down 10.8% in the quarter. That compares with a fall of 7% in the first half of 2020. The largest declines were seen in clothing and footwear (-25.1%q/q), department stores (-19.5%q/q) and cafes and restaurants (-18.7%q/q). Food sales benefitted from the stay-at-home restrictions, up 5.3%q/q to almost match the surge from Q1 2020.
As foreshadowed in last week's CPI data, there was very significant discounting that occurred in clothing and footwear in Q3 (-3.8%q/q), as retailers cut prices to clear winter inventories and to generate cash flow. This also occurred in department stores, with prices there down 2.6%q/q. Food prices fell by 0.6%q/q, with the CPI data showing a fall in fruit prices in Q3. These declines held overall growth in retail prices to a 0.1% rise in Q3, down from 0.7% in Q2.
The good news is that nominal retail sales returned to growth in September with a 1.3%m/m rise after falling in each of the prior 3 months. This was driven by a 5.2% rise in Queensland as virus concerns eased and by the start of the reopening in New South Wales (2.3%). Sales ex-food posted a much larger rise (3.6%) than the headline increase. This was supported by rebounds in clothing and footwear (5.9%), cafes and restaurants (5.0%) and household goods (4.3%) after falls in August.
Spending in the online segment continued to rise in September (3.4%), though the pace was much slower than the surges seen in each of the prior 3 months that ranged between 14-17%. Non-food sales were up 4.5%m/m and food sales were broadly flat (0.3%m/m). Over Q3, total online sales surged through $12bn, with around $9bn of this occurring in the non-food space.
Retail Sales — September | Insights
The Australian economy likely contracted by around 3% in Q3, with the bulk of this linked to falling household spending due to the lockdowns following the Delta outbreaks. The rise in nominal sales in September is an encouraging sign during what was the very early stages of reopening in New South Wales. High-frequency indicators on household spending have shown strong momentum since the lockdowns were ended, and with a more accelerated easing of restrictions occurring this points to a robust rebound in Q4.
