Australia's Q2 real retail sales to show a more muted 0.4%qtr gain

Australia's real retail sales recorded a solid 0.7% gain in Q1, following strong gains of 1.2% in Q4 and 1% in Q3. Note that the Q4 gain was augmented by an abnormally large, and questionable, 'level shift' in electronic goods retail. 

Q2 is expected to show a more muted 0.4%qtr gain. Despite a kick-up in June, lacklustre sales in April-May mean nominal sales will be up about 0.7%qtr in Q2. The CPI detail suggests retail prices were up about 0.3%qtr vs 0.5% in Q1. The mix implies a 0.4% gain in real retail sales. Note that base effects (a -0.1%qtr in Q2 last year) mean annual growth lifts from 2.8% to 3.4%. 

More generally, the retail survey is a problematic guide to total consumer spending. The RBA was badly wrong-footed by the retail strength in 2014 H2. That said, the softer Q2 retail read is expected to be more in line with the broader national accounts measures this time around, even understating conditions slightly.