Australian retail sales volumes posted their strongest increase on record in Q4 as the shops reopened from the Delta lockdowns. December's fall in sales indicates the momentum was fading towards the end of the quarter and have subsequently been hit by the Omicron wave. However, underlying household spending remains well supported by a strong labour market and accumulated savings, with retail sales likely to again rebound as concerns over the pandemic ease.
Retail Sales — December | By the numbers
- National retail sales pulled back by -4.4% in December to $31.9bn after a 7.3% surge saw turnover rising to a record high in November.
- 12-month retail sales moderated to a 4.8% pace from 5.8%.
- Retail volumes (real terms) rebounded by a record 8.2% in Q4, stronger than expected (7.8%), swinging year-ended growth from -2.2% to 3.6%. Volumes contracted by 4.4% amid the Delta lockdowns in Q3.
- Retail prices firmed by 0.5% in the quarter to be 1.6% higher over the year.
Retail Sales — December | The details
Quarterly retail sales volumes rebounded from a record fall in Q3 (-4.4%) during the Delta lockdowns to post a record rise (8.2%) on reopening in Q4.
Volumes across the states reopening (NSW, Vic & ACT) surged back rising by 12.9% in the quarter after falling by 8.6% in Q3 and rebounded back above their pre-pandemic levels. Across the rest of the nation, volumes advanced at a firmer pace (2.1%) than in the prior quarter (1.6%) to remain well above their pre-pandemic levels.
Pent-up demand post lockdown and Black Friday sales in the run-up to Christmas saw discretionary retail consumption surge, with volumes ex-food up by 15.7% in Q4. Consistent with eased restrictions, clothing and footwear (43.1%), department stores (25%), and cafes and restaurants (18.8%) drove the rebound. With people returning to dining out, basic food volumes contracted (-1.6%).
Retail prices were held to a 0.5% rise in the quarter as a decline in food prices (-0.1%) attenuated the impact of strong increases in some of the other categories. During Q3, clothing and footwear (-3.8%) and department store (-2.6%) prices fell sharply due to widespread discounting as retailers sought to clear accumulated winter inventories. Despite the Black Friday period falling in Q4, less discounting than in the previous quarter saw prices bouncing back: clothing and footwear 2.7% and department stores 2%. Consistent with the recent CPI data, household goods prices accelerated in the quarter (2.1%) as strong demand and supply constraints pushed up prices for many consumer durables. Prices at cafes and restaurants saw their fastest quarterly rise in a year (0.9%) coming out of the lockdowns.
Turning to December's sales, turnover moderated from the record high reached in the prior month when Black Friday sales were in full flow and many were Christmas shopping early to avoid stock availability issues. While December's 4.4% fall was the largest since the national lockdown at the outset of the pandemic, this only took retail sales back to a little above their level in October. With non-food sales driving the surge in November (14.4%), they unwound in December (-8.5%); basic food sales lifted by 2.2%, boosted by supermarket (1.4%) and liquor sales (8.6%) for the Christmas/new year period.
Unsurprisingly, given the easing in restrictions and with Black Friday sales coming in the month prior, online spending continued to decline from its peak during the Delta lockdowns. Online sales were down 4.9% in the month, with non-food sales falling by 9.6%, though food sales lifted by 8.5%.
Retail Sales — December | Insights
Household spending at the shops was incredibly robust once they reopened in the states affected by the Delta lockdowns. The rebound in volumes in Q4 (8.2%) comfortably surpassed the previous record set post the national lockdown (6.3%). Income support at similar levels to the JobKeeper program at the outset of the pandemic meant that pent-up demand combined with elevated savings to drive household spending in the quarter. December's fall shows this momentum started fading towards the end of the period, ahead of the Omicron wave. Mobility data confirms a sharp decline in retail footfall through January as precaution behaviour, isolation requirements and supply issues kept many away from the shops. However, as with earlier waves, expect retail spending to bounce back once these concerns ease, supported by a strong labour market and accumulated savings.
