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3 Jul 2015
Australian retail sales disappoints, bodes bad for consumer sentiment – Westpac
FXStreet (Barcelona) - Matthew Hassan, Senior Economist at Westpac, reviews the Australian retail sales data release and explains the possible impact on consumer spending and sentiment.
Key Quotes
“Retail sales were slightly disappointing in May posting a 0.3% rise vs expectations of a 0.5% gain. April's flat result was revised down a touch to a 0.1% dip. The RBA’s May rate cut and a decent bounce in consumer sentiment had been expected to drive a somewhat better gain. Retailers should also be seeing some benefit from the lower AUD which has realigned tourism flows more in their favour – both inbound and outbound.”
“Instead the 0.3% gain means trend sales growth, having achieved no great heights to begin with, is again slipping lower. At 0.2%mth, trend sales growth is tracking an annualised pace of just 3%.”
“The result adds to a disappointing loss of momentum through Mar-Apr. June may see more of a lift with Budget measures aimed at stimulating small business investment reportedly generating stronger sales in some segments ahead of the end of financial year. Industry figures on new car sales, also released today, point to a solid 6.2%mth jump in June car sales (Westpac estimates of seasonally adjusted monthly moves) led by a 9%+ rise in 'consumer' sales, much of which is likely to be sales to SMEs/unincorporated businesses (how these get classified in the ABS estimates remains to be seen).”
“Weighing against these June positives is a fall-back in consumer sentiment following May’s bounce. More generally, even with a strong June, retail sales are still likely to record a disappointing Q2. Nominal sales are on track for a subdued 0.5-1%qtr rise compared to Q1's 1.1% gain. It's a similar story for car sales with consumer vehicle purchases likely to show a 3.5%qtr gain in Q2 vs 5.4% in Q1 even with the June surge.”
“What this all means for total consumer spending is unclear as surveyed retail sales and vehicle sales have often been poor guides to overall spending in recent years. As such, the broader spending estimates from the quarterly national accounts – next update due September 2 – are required for a definitive read on consumer momentum.”
Key Quotes
“Retail sales were slightly disappointing in May posting a 0.3% rise vs expectations of a 0.5% gain. April's flat result was revised down a touch to a 0.1% dip. The RBA’s May rate cut and a decent bounce in consumer sentiment had been expected to drive a somewhat better gain. Retailers should also be seeing some benefit from the lower AUD which has realigned tourism flows more in their favour – both inbound and outbound.”
“Instead the 0.3% gain means trend sales growth, having achieved no great heights to begin with, is again slipping lower. At 0.2%mth, trend sales growth is tracking an annualised pace of just 3%.”
“The result adds to a disappointing loss of momentum through Mar-Apr. June may see more of a lift with Budget measures aimed at stimulating small business investment reportedly generating stronger sales in some segments ahead of the end of financial year. Industry figures on new car sales, also released today, point to a solid 6.2%mth jump in June car sales (Westpac estimates of seasonally adjusted monthly moves) led by a 9%+ rise in 'consumer' sales, much of which is likely to be sales to SMEs/unincorporated businesses (how these get classified in the ABS estimates remains to be seen).”
“Weighing against these June positives is a fall-back in consumer sentiment following May’s bounce. More generally, even with a strong June, retail sales are still likely to record a disappointing Q2. Nominal sales are on track for a subdued 0.5-1%qtr rise compared to Q1's 1.1% gain. It's a similar story for car sales with consumer vehicle purchases likely to show a 3.5%qtr gain in Q2 vs 5.4% in Q1 even with the June surge.”
“What this all means for total consumer spending is unclear as surveyed retail sales and vehicle sales have often been poor guides to overall spending in recent years. As such, the broader spending estimates from the quarterly national accounts – next update due September 2 – are required for a definitive read on consumer momentum.”