Australia’s retail sales rise above expectations in August

Australia’s retail sales came in above expectations in August following several months of near-zero growth. Retail sales grew 0.4 percent in the month, the strongest monthly result since October, ending a run of especially soft results. On an annual basis, the retail sales grew slightly by 3.3 percent; however, it continues to be around quite low levels given earlier weakness.

Region wise, New South Wales and Victoria significantly contributed to the August rise, arresting earlier softness. Sales grew 0.5 percent and 0.7 percent month-on-month respectively in the regions. This is consistent with most other indicators of economy that imply that growth in these regions continues to be strong, noted ANZ in a research note. However, retail spending has been rebound in other regions too, especially in Queensland. This is a positive indication in terms of underpinning broadening growth, added ANZ.

Australia’s department stores recovered with monthly expansion of 3.5 percent, following a decline of 5.8 percent in the previous month. Meanwhile, sales of food grew modestly by 0.3 percent following a 0.7 percent increase in July. It is positive to see an improvement in food spending is the past couple of months given that the food sector mainly drove the weakness in the second quarter consumer spending. Huge stores also recorded solid growth in the month, rising 0.8 percent; however, this follows a severe sequential decline of 0.5 percent in July.

Strong consumer sentiment and bolstering housing market provide a positive backdrop to retail sales; however, headwinds continue to be there in the shape of weak income growth and rising competition.  These weigh in on retail prices. The mixed picture is expected to continue, according to ANZ.