Australia: Disappointing retail sales figures - Westpac

Matthew Hassan, Research Analyst at Westpac, explains that the Australian March retail report was a disappointing update that came in materially below expectations and points to downside risks to the wider consumer spending measures in the March quarter GDP update.

Key Quotes

“Sales came in flat for the March month vs expectations of a 0.2% gain. The result follows a 0.6% gain in Feb and a 0.2% rise in Jan. The detail showed a solid 0.7% gain for basic food but declines across most other store categories with total retail ex basic food down 0.4%mth. Annual growth in total nominal retail sales lifted to 3.1%yr, a nine month high. Annual growth in sales ex basic food edged back to 2.3%yr.”

“The real disappointment however was the wash-up for Q1 as a whole. Nominal sales posted a 0.6%qtr rise, a touch below our expectations of a 0.7% gain, but adjusting for prices, retail volumes rose just 0.2%qtr, well below the consensus expectation of a 0.5% gain.”

“The main surprise was around retail prices which rose +0.4% – we had been expecting a slight decline with the Q1 CPI detail suggesting a 0.1-0.2% fall. The surprises came across a range of categories including a larger than expected price rises for food and smaller than expected declines for clothing and department stores. In short, rather than price falls concealing stronger volumes, more of the gain in nominal sales over the quarter has been due to price increases.”

“Overall, the downside surprise for Q1 real retail sales clearly points to downside risks to the wider measures of consumer spending in the Q1 national accounts due out on June 6. That said, much of the weakness appears to reflect specific challenges facing the retail sector with business surveys suggesting consumer spending on services has been firmer.”