Australian retail sales bounced back modestly in Aug’18 majorly due to an increase in spending in discretionary areas. The annual growth for both total and non-food sales stood at the highest level in over a year. While year-end growth for total and non-food sales lifted by the most in over a year, near-term, sales increased by 4.3% and 2.9% respectively on a three-month annualised basis.
This has surely put to rest any near-term concerns about a spending slowdown on the back of falling home prices. According to the Australian Bureau of Statistics (ABS), sales increased by 0.3% to $26.87 billion in seasonally adjusted terms, that was very much in line with market expectations with department stores posting the biggest gains. Thanks to a low base effect created by a 0.6% decline in August 2017, the monthly increase saw annual growth in sales lift to 3.8%, the fastest increase since May’17. That was up from 2.9% in the year to July, and well above the recent cyclical low of 1.5% seen in September last year.
The modest lift followed an unchanged reading in July. The improvement in August was widespread across the sector - Cafes, restaurants and takeaway food services (0.7%) led the rises. Gains were also seen in clothing, footwear and personal accessory retailing (0.8%), other retailing (0.4%), department stores (0.9%) and household goods retailing (0.2%). There was some evidence that weaker home prices may be weighing on demand for household goods. But, in particular the 0.8% and 0.9% respective rises in clothing and department store sales reversed some of the 2.1% and 1.8% falls in July, indicating that weather may have been a factor. Interestingly, the weak result from food sales were offset by spending in discretionary areas.
Imitating the performance by category in Aug, sales also increased in a majority of states and territories, including Victoria, New South Wales & those areas where property prices fell at the fastest pace in recent months. Here’s a Territory–wise synopsis of the growth:
New South Wales - 0.5%
Victoria - 0.2%
South Australia - 0.8%
Queensland - 0.1%
Tasmania - 0.6%
And, the Australian Capital Territory - 0.2%
It clearly appears that the impact of falling home prices in many parts of the country is yet to deter Australians spending at the shops, however, this is contrary to the recent trend in new car sales data.
With rising petrol prices and falling house prices the upward trend is not likely to last forever. An increase in competition from the rapidly growing e-retailing sector is also challenging the trends. Analysts suspect that that the annual real consumption growth will slow from just below 3.0% this year to about 2.0% next year. So, it would be wise to keep an eye on these near-term and long-term trends and strategize your investments across these sectors accordingly.
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