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Australia’s Q3 2019 retail data is due out on Monday, November 4; it is expected to increase by 1.1 percent q/q, including 0.4 percent volume growth and 0.7 percent price growth. September is expected to do the quarter’s heavy lifting in monthly nominal growth, with 0.7 percent m/m growth, according to the latest report from ANZ Research.
Food prices are behind the strong price growth; while modest volume growth shows the improvement tax and rate cuts produced compared to the Q2 outcome, offset by the ongoing impediments to spending of high debt, flat wages and increased living costs.
Price growth is likely to moderate a little in Q3 compared to Q2 (0.7 percent q/q Q3 vs 0.8 percent Q2), but none-the-less expect annual price growth is expected to be the highest year-on-year result since Q2 2009 at 2.6 percent, the report added.
The increase in prices of essentials like food, utilities, education and health creates a hurdle for improving retail volumes. Flat wages and high household debt are constraining household budgets, forcing many households to delay bigger-ticket purchases such as furniture and appliances.
The recent downturn in retail spending has been particularly painful for these categories, with the drop in housing turnover also contributing.
While this year’s tax cuts this year did not produce a spike in August spending, they did coincide with a change in spending patterns. Recreation goods, fashion and department stores grew at rates well above their two-year averages.
While tax cuts don’t appear to completely offset other barriers to discretionary spending, we expect an ongoing modest lift in discretionary categories as they filter through to household budgets. The slight movement away from food towards non-food items as a result of tax cuts is a positive for Q3 volume expectations, ANZ Research further noted in the report.
