Australian retail sales figure fails to meet expectations in June

Australian retail sales grew just 0.1 percent on sequential basis in June, disappointing again, in spite of a recovery in clothing sales. It came in below consensus expectation of 0.4 percent.

On year-on-year basis retail sales rose 2.8 percent in the month, the weakest annual rise since July 2013. This was also lower than the long-run average of 4.5 percent and below the 3.4 percent sales growth seen in year to May. On a three-month end annualized basis, retail sales rose 1.9 percent in June, as compared with 2.8 percent growth witnessed in May.

Surprisingly, retail sales in Victoria and NSW dropped 0.1 percent and 0.2 percent respectively on sequential basis in June. Over the past year, spending in these two states has supported retail sales. On the contrary, sales grew strongly in Queensland by 1.1 percent in the month.

Delving into details, clothing sales recovered strongly by rising 4.7 percent on sequential basis on cold weather, in line with expectations. Spending on hardware, building and garden supplies and on food was quite subdued. Spending on hardware, building and garden supplies dropped 0.5 percent month-on-month, while on food it dropped 0.6 percent on sequential basis in June.

Interestingly, the softness was focused on small store sales. Admittedly, the more reliably-gauged sales by large retailers grew 0.4 percent on sequential basis. This was the strongest since October 2015. Given that small store sales are surveyed, they tend to be volatile, noted ANZ in a research report.

Volumes of retail sales were also subdued as compared with expectations. Volumes rose 0.4 percent quarter-on-quarter in the second quarter as compared with 0.5 percent recorded in the first quarter. On an annual basis, volumes remained moderate, with growth slowing to 1.9 percent in the second quarter from the prior’s 2.3 percent growth.

Retail price inflation continued to be subdued with prices growing 0.2 percent quarter-on-quarter in the second quarter as compared with 0.1 percent in the first quarter. The effect of competition was again underlined with prices dropping for clothing and soft goods in department stores and other retailers. On a year-on-year basis, prices rose only 1.3 percent. The June’s data underlined certain underlying fragility in the Australian economy and strengthen the appropriateness of ultra-easy monetary policy settings, according to ANZ.