Retail spending in Australia rose just 0.3% over February 2024, according to the Australian Bureau of Statistics (ABS) retail data released in late March. Stripping out the effect of Taylor Swift’s Eras Tour shows retail sales as almost stagnant.
The Taylor Swift effect bolstered spending on clothing, merchandise, accessories and dining out. But Ben Dorber, head of ABS retail statistics, said “Looking past the temporary and one-off impact of the Taylor Swift concerts, underlying growth in retail turnover was up only 0.1 per cent.”
Australian retail sales increased +0.3% month on month (mom), slightly below consensus expectations for consecutive months. Sales were strongest for clothing and footwear in NSW and Victoria, with nominal sales tracking sideways in trend terms.
Source: Goldman Sachs
The data
Nominal retail sales increased +0.3% mom in February to be +1.6% year on year higher over the year. The rise was slightly less than consensus expectations (+0.4% mom).
Compositionally, the spending was strongest across clothing and soft goods (+4.2% mom) and department stores (+2.3% mom), with a modest increase across cafes and restaurants (+0.5% mom). Spending contracted across household goods (-0.8% mom), “other” retailing (-0.4% mom) and food (-0.1% mom).
Regionally, sales were firmest in Victoria (+0.7% mom) and NSW (+0.6% mom) but fell in QLD (-0.5% mom).
According to Sean Langcake of Oxford Economics Australia, “The trend in retail sales was very weak… Household goods retailing continues to fall sharply due to a mix of consumer restraint and price deflation. The outlook will improve throughout the year as inflation wanes and real wage growth improves. But momentum in sales will be patchy, especially over the first half of the year.”
Source: Australian Financial Review
The Reverse Bank of Australia will be watching the retail figures along with labour data very closely as it seeks to calibrate its rate-reducing strategy over the coming months. The trick is to avoid recession by not keeping rates too high for too long, but also not take the central bank’s foot off the brakes until inflation shows significant signs of returning to the target range of 2-3%. Markets appear to be forecasting the first rate cut around September, but the futures markets can be quite quick in changing their minds if the data surprises, so nothing should be taken for granted.
Disclaimer: Clime Asset Management Pty Limited | AFSL 221146 | ABN 72 098 420 770. The information provided in this post is intended for general use only. The information presented does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information contained therein. Please consider the relevant disclosure document/s before investing in one of our products. Investment in securities and other financial products involves risk. An investment in a financial product may have the potential for capital growth and income but may also carry the risk that the total return on the investment may be less than the amount contributed directly by the investor. Investors risk losing some or all of their capital invested. Past performance of financial products is not a reliable indicator of future performance or returns.
