Australian Retail Sales Flatline

Australian retail sales missed expectations again in September, following a sharp fall in August.

According to the Australian Bureau of Statistics (ABS), nominal sales growth was flat at 0.0% in seasonally adjusted terms, short of forecasts for a gain of 0.4%.

Quarterly figures for retail sales volumes rose by 0.1%, slightly ahead of expectations with analysts forecasting flat growth.

The Australian dollar fell sharply on the result, and a short time ago was down 0.3% to 0.7689 US cents.

September’s result follows a bad miss in the August results, when retail sales unexpectedly declined by 0.6%. The August figure was subsequently revised slightly higher to -0.5%.

The flat result for September saw the year-on-year pace of sales slow to just 1.4%, down from 2.13% in August.

The retail sales report measures changes in dollars spent on retail goods from one month to the next.

In seasonally adjusted terms, gains were led by a pickup in department store sales to 2.1% (up from 0.7% in August) and food sales (0.6% growth in September).

Those were offset by falls in the other major categories. Household good retailing fell by 0.4% while footwear and personal accessory retailing dipped by 0.7%. Both categories recorded their third straight months of declines in September. Sales in the category of other retailing recorded a 1.7% fall.

Across the states and territories, falls in retail sales were led by Northern Territory (-1.7%) and WA (-1.3%).

Victoria was flat and all other states posted a gain for the month, led by South Australia with a 0.7% rise.

Sales volume growth of 0.1% in the September quarter was down from the 1.5% increase reported for the three months to the end of June.

The volume measure eliminates the impact of price movements and helps provide a guide on the state of household consumption expenditure — the largest part of Australian GDP at just under 60%.

Capital Economics Chief Economist Paul Dales said today’s result was reflective of the retail industry’s recent struggles, as retailers’ attempts to attract customers by cutting prices failed to produce higher sales volumes.

“The 0.0% m/m change in retail sales values in September comes after falls of 0.3% m/m and 0.5% m/m in the previous two months and meant that sales values fell by 0.3% q/q in Q3,” Dales said.

“It was only because retailers decreased prices by 0.4% q/q that volumes rose by 0.1% q/q. In other words, retailers discounted by more than usual and didn’t get much of a return from it.”

Dales added that other indicators suggest the declines in domestic consumption as part of Q3 GDP won’t be too steep.

Westpac’s Matthew Hassan agrees, saying that as a result of lower prices, Australian households “do not look to be cutting back on consumption quite as sharply as feared”.

In the wake of the retail result, Capital Economics is forecasting consumption growth of 0.4% in the September quarter, down from 0.7% in Q2.

“But these data show that faster jobs growth is not offsetting the pressure on household incomes from low wage growth, rising utility bills, high debt and stagnating house prices,” Dales said.

Data from CoreLogic earlier this week showed Australian house prices continued to cool in October, led by falls in the Sydney market which dipped by 0.4%.

The retail sales data followed a relatively lacklustre print for Ai Group’s Performance of Services Index (PSI) earlier this morning.

The figures showed Australia’ services sector expanded slightly in September, but perhaps not surprisingly, it revealed Australia’s hospitality and retail sectors remain in a state of contraction.