Australian retail sales grow strongly year-on-year in December

Australian retail sales dropped in December on a sequential basis, reflecting payback from the iPhone and Black Friday related strength in the earlier month. Sales fell 0.5 percent sequentially, widely consistent with the projections and following the strong growth in November. On a year-on-year basis, retail sales grew strongly by 2.5 percent, the strongest annual rate since July 2017. In terms of trend, retail sales rose 0.2 percent sequentially for the third straight month and 2 percent year-on-year.

Sales were subdued in December for household goods and other retailers, both of which rose solidly the previous month because of the iPhone. Food was the only sector to have recorded a rise in December.

In the fourth quarter as a whole, nominal retail sales grew 1.1 percent, a rebound on the decline of 0.2 percent in the prior quarter. Adjusting for prices, retail volumes rose strongly by 0.9 percent, a marked rebound from the 0.1 percent rise in the third quarter. This sets up a strong base for private consumption in the fourth quarter. In annual terms, retail volumes were up 2.6 percent year-on-year while prices are 0.2 percent year-on-year lower.

It is quite rate for retail prices to fall in annual terms, especially for two consecutive quarters. This emphasizes just how poor pricing power is in the face of intense competitive pressures, noted ANZ in a research report.

Spending on goods and spending on services saw a continuation in diverging trends in the December quarter, with spending on goods rise in terms of volumes but fall in terms of prices. On the contrary, spending on cafes, restaurants and takeaway food rose in terms of volumes, whereas prices in this category rise in the quarter, stated ANZ.

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