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Category: Retail / Economic Trends / Business, Economics and Finance

Retail sales spring higher, but some softness remains

Friday, 4 Nov 2016 11:42:47 | Stephen Letts

The popular brunch option of smashed avocado has become the new locus of an intergenerational debate on housing affordability. (Flickr: Katherine Lim)

The springtime urge to spruce up the house and eat out has driven a better-than-expected jump in retail sales in September.

Retail sales jumped 0.6 per cent over the month, in seasonally adjusted terms, kicking up another step from the 0.5 per cent rise in August.

The standout performance was a 2.3 per cent rise in household goods, with hardware and gardening supplies up 3 per cent and electrical goods up a solid 2.7 per cent.

Cafes and takeaways also continued to do a roaring trade, as the insatiable appetite for cafe lattes and smashed avocado drove sales up by 1 per cent over the month.

Other food retailing was relatively flat, with supermarket and grocery sales up just 0.1 per cent for the month.

However, over the September quarter, retail sales pulled back.

"The outright fall in real retail sales in the third quarter is consistent with a further slowdown in real consumption growth," said assistant economist at Capital Economics Kate Hickie.

"After taking account of price effects, real retail sales fell by 0.1 per cent in the third quarter as whole.

"That was the first outright fall since the second quarter of 2014 and was largely driven by a decline in the volume of department store and food sales.

"That said, the better-than-expected rise in nominal sales in September means there is at least some momentum in consumer spending going into the fourth quarter."

The Australian Retailers' Association said the results pointed to solid Christmas trading.

"With some areas, such as department stores, still seeing the negative impacts of restructures on growth we also see strong clothing and footwear sales growth within the sector in year-on-year sales," ARA executive director Russell Zimmerman said.

"The good news for retail is we are continuing to see a strengthening in many discretionary spend areas which will boost retailer confidence in the build up to Christmas, while we also see some sections of the retail sector continue to have trouble."

JP Morgan economist Tom Kennedy was more reserved saying consumption is looking "a little shaky".

"Australia's September retail survey was mixed though, on balance, had softer undertones regarding the outlook for household consumption," Mr Kennedy said.

"The bad news, at least from a real GDP point of view, is that all of the strength appears to have come by way of rising prices, with retail volumes contracting 0.1 per cent over the quarter.

"Household consumption in the June quarter was surprisingly soft ... and today's print indicates that momentum is not moving in the right direction.

"This is important as the stability of the consumption data is paramount to the RBA given the persistent weakness in core inflation and means that officials are likely to be increasingly sensitive to any wobble in the upcoming activity data."

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