Australia: Aug retail sales fall 0.6% - Westpac

Matthew Hassan, Research Analyst at Westpac, notes that Australia’s retail sales came in well below expectations in August recording a 0.6% contraction vs market expectations of a 0.3% gain, with July’s flat result revised down to a 0.2% dip.

Key Quotes

“This was the weakest monthly result since March 2013 with the 0.8% contraction over July-August the largest 2mth decline since October 2010.”

“Retail sales have tracked an uneven path in 2017, with weather factors restraining sales in Q1 followed by a recovery through Q2.”

“That recovery has been very short lived with the weak July-August sales results suggesting nominal sales may have stalled completely quarter to quarter in Q3.”

“The survey detail showed the weakness was broadly based across both store categories and states.”

“Food retail, which accounts for 40% of all sales, recorded a 0.6% fall. Cafes and restaurants recorded a large 1.3% decline. Non food retail fared a little better with a 0.3% dip overall. However within this, household goods retail was down 1% following a hefty 2.1% drop in July. Moreover the only category to record a gain was department stores where sales rose 0.7% but were coming off a sharp 3% drop over the previous two months.”

“By state. NSW recorded a milder 0.2% dip in August but that followed a bigger decline in Jul. Vic and Qld recorded sharper contractions of 0.8%mth.”

“All of the major eastern states have seen comparable sales declines over the July-August period.”

“Note that retail sales are in nominal terms so moves reflect both volume and price changes. We will get a better sense of how pricing has impacted with the release of the Q3 CPI later this month. However, even if price discounting has been a bigger than expected factor the underlying picture for Q3 retail volumes is still unlikely to look good, in turn pointing to significant downside risks to the Q3 consumption figures in the national accounts and wider GDP growth.”