Australia’s retail sales growth remains soft; RBA likely to further ease policy in coming months

According to Australian Bureau of Statistics, Australia’s retail turnover grew 0.2% m/m in April, seasonally adjusted. This is softer than the growth of 0.4% seen in March. Australia’s retail sales remain on the soft trend witnessed in early 2016. On an annual basis, retail sales grew 3.6% y/y in April, as compared with the ten year average annual growth rate of 4.5%.

Australia recorded subdued sales in clothing that declined 0.9% m/m, consistent with anecdotes of weak winter clothing sales because of an unusual warm weather. On a year-on-year basis, clothing sales grew 4.4%, a severe slowdown from recent annual growth rate of about 9%. Weakness in clothing sales was especially apparent in Victoria, where it declined 1.9% m/m.

According to Australian Bureau of Statistics’ press release, retail sales rose “in cafes, restaurants and takeaway food services (1.0 per cent), household goods retailing (0.3 per cent), clothing, footwear and personal accessory retailing (0.5 per cent), other retailing (0.2 per cent) and department stores (0.4 per cent). Turnover in food retailing fell 0.3 per cent in April 2016”.

Retail sales of electrical and electronic goods also declined 1.1% m/m. Meanwhile, housing related spending is seemed to have been supported by improved conditions and higher house prices. Sales of floor covering, furniture, textile goods and houseware in particular grew 1.5% m/m, whereas those of building and garden supplies and hardware grew 1.2% m/m.

Region wise, rises in retail sales were recorded in “New South Wales (0.3 per cent), Western Australia (0.6 per cent), South Australia (0.5 per cent), Tasmania (1.0 per cent), the Australian Capital Territory (0.9 per cent) and the Northern Territory (0.7 per cent). There were falls in Victoria (-0.3 per cent) and Queensland (-0.1 per cent) in April 2016”, stated the press release.

The value of retail sales are being affected by prices and not volumes, noted ANZ in a research report. April’s data is consistent with the view that the Reserve Bank of Australia is concentrating on weak price pressures and is expected to further ease policy in the months to come, added ANZ. Data on retail spending, jobs growth, inflation and business investment is likely to aid the central bank in determining its next action, stated St George Economics in a research report.

“We expect a rate cut in August but it is not a foregone conclusion”, added St George Economics.