Oct sales: flat%mth, 2.1%yr (mkt f/c 0.3%). Policy stimulus goes AWOL as consumer ‘spending strike’ continues.
Retail sales came in much stronger than expected in Nov on what looks to be a combination of ‘Black Friday’ sales and some delayed effect from policy stimulus measures.
Total retail sales rose 0.9%mth, well above expectations of a 0.4% gain and the strongest monthly result since November 2017. Annual growth lifted to 3.2%yr.
Much of this reflects the growing popularity of the ‘Black Friday’ sales event although the detail suggests traditional retail also recorded a strong gain that would be consistent with some delayed effect from recent stimulus measures – the tax offset payments that went out in the third quarter and interest rate cuts in June, July and October. The combined value of this should be adding around $16.6bn to household disposable incomes over the year to June 2020 but so far had seen essentially no flow through to spending. Note that, in dollar terms, the relatively strong Nov gain in retail sales is still only worth $250mn.
The storetype detail showed very strong gains for clothing (+3.1%) and department stores (+3.4%), robust rises for household goods (+1.2%, led by ) and cafes and restaurants (0.9%) and a solid 0.5% gain for basic food. Note that sales are in nominal terms so any price discounting acts as a drag.
The ABS provides a sales breakdown by channel, i.e. online vs ‘in store’ sales. The figures cover Australian retailers and the local subsidiaries of offshore retailers (i.e. Amazon Australia) but exclude sales to offshore based retailers. The figures show online sales totalled $2.1bn, 7.1% of total retail in the month vs 6.5% in the month prior and a new record high. That said, the month to month rise of $266mn is only about a fifth of the $1.4bn increase in total retail. Indeed, our estimates suggest the gain in online sales was about 4%mth in seasonally adjusted terms, contributing just 0.2ppts to the overall gain with retail sales ex online up a robust 0.7%mth.
Sales rose across all major states, NSW up 0.7%, Vic up 1.1%, Qld up 1.2%, SA up 1.4% and WA up 0.5%.
Small retailers recorded a welcome 0.7% gain, having borne the brunt of the slowdown in 2019 although sales are still contracting on an annual basis, –1.2%. Large retailers have seen steadier sales gains and recorded a 1% rise in Nov.
While we welcome the improvement and see evidence of a wider lift we are wary that much of the Nov gain may prove to be a temporary effect due to the rising popularity of ‘Black Friday’ sales that has sees a corresponding drag in months to come. Notably, the lift also comes despite business and consumer surveys pointing to continued subdued conditions. The data also predates the summer bushfires which are likely to impact both spending and consumers sentiment.
