Australia: Another disappointing month for retail sales - ANZ

The Australian retail sector is clearly facing challenging times, with very weak growth in volumes and prices falling in Q3, according to Jo Masters, Senior Economist at ANZ.

Key Quotes

“The combination of international competition on prices and several headwinds hitting household balance sheets is proving a challenging mix. It will be interesting to monitor spending on household items in coming months given a slowing housing market.   The data sets up a soft base for private consumption in the Q3 GDP print (to be released on 6 December), though retail sales is only 30% of consumption. 

• Retail sales recorded another disappointing month, with sales flat in September after two consecutive monthly declines (of -0.8% in total). Retail sales are now just 1.4% higher than a year ago and are down 2.8% on a three month-end annualised basis – both the weakest readings since late 2010.  
• Sales fell in the month for household goods, clothing and other retail, and rose for food, department stores and café, restaurants & takeaway. Sales of household goods are now 1.1% lower than a year ago, the first negative annual growth rate since December 2012. Moreover, sales in this category fell in every state except Queensland and Tasmania. This suggests the slowing in house price growth – and perhaps expectations of further slowdown - is impacting consumer behaviour. 
• Department store sales rose a healthy 2.1% m/m, the second consecutive monthly increase, and are now up 1.3% y/y. Indeed, while small store sales fell in the month, the less volatile large store sales rose by 0.3% m/m.  
• On a state basis, the weakness was concentrated in Western Australia, where sales fell by 1.3% m/m, and Norther Territory (-1.7% m/m). Other states recorded a rise in sales.
• Real quarterly retail sales barely rose, up just 0.1% q/q (above the market expectation but a touch below our own), much weaker than the 1.5% q/q recorded in Q2. Nonetheless, annual growth in real retail sales accelerated a touch, to 2.6% y/y in Q3, from 2.5% y/y the previous quarter and 1.2% y/y in Q1. Retail volumes fell for household goods (-1.4% q/q) and cafés, restaurants & takeaway (-0.7% q/q). 
• Retail prices fell by 0.4% q/q, and are now falling on an annual basis (-0.3% y/y in Q3) for the first time since early 2012 and in what is a rare occurrence.”