The Bull

Wednesday 20

February, 2019 4:53 PM



Retail sales weaker than expected

Retail sales weaker than expected

Retail trade fell by 0.4 per cent in December after an upwardly-revised 0.5 per cent (previously-reported +0.4 per cent) increase in November.

Share |

05.02.2019 03:55 PM

WA retail spending hits 3-year high
Largest trade surplus in 2 years
Retail trade; International trade; New vehicle sales

Retail trade lifts: Retail trade fell by 0.4 per cent in December after an upwardly-revised 0.5 per cent (previously-reported +0.4 per cent) increase in November. Annual spending growth, however, was unchanged at 2.8 per cent in December. In trend terms, spending eased to 3.2 per cent over the year to December from 3.4 per cent in November. Annual retail sales in Western Australia were at 3-year highs.

In real (inflation-adjusted) terms, retail trade rose by 0.1 per cent in the December quarter after a 0.2 per cent rise in the September quarter.

Retail prices: Prices across retailers rose by 0.6 per cent in the December quarter after a 0.4 per cent lift in the September quarter.

Trade surplus: The trade surplus rose to a two-year high of $3,681 million in December from $2,256 million in November (consensus: +$2,225m). It was the 12th successive surplus in 2018. Australia's exports to China were at record highs in the year to December. China now accounts for a record 34.2 per cent of Australian exports.

New vehicle sales: In January, 81,994 new vehicles were sold, down by 7.4 per cent over the year. In the twelve months to January, sales totalled 1,146,554 units, down 3.9 per cent on a year ago. 

What does it all mean?

Retail spending may have been down in December, but retail prices rose by the most in two years. Over the year to December, the annual growth rate of prices rose by 0.3 per cent to 1.4 per cent with prices for food, household goods, and cafes, restaurants and takeaway food all lifting. But this doesn’t appear to be deterring Western Australians with annual retail spending at the strongest growth rate in three years, albeit off a low base.

Despite a lift in some price categories, clothes remain a magnet for consumers with real purchases up 5.8 per cent over the year. Pharmaceutical, cosmetics and toiletry goods are also in big demand, up by near 5 per cent over the year. The only areas of weakness in terms of inflation-adjusted sales over the year were newspapers & books, liquor and other recreational goods like sporting equipment, toys & games.

Australia recorded the largest trade surplus in two years in December. Imports have slowed, reflecting a softening in domestic demand. That said, exports to China are at fresh record highs.

What do the figures show?
Retail trade

Retail trade fell by 0.4 per cent in December after an upwardly-revised 0.5 per cent (previously-reported +0.4 per cent) increase in November. Annual spending growth, however, was unchanged at 2.8 per cent in December. In trend terms, spending eased to 3.2 per cent over the year to December from 3.4 per cent in November.

Non-food retailing fell by 1.0 per cent in December, but annual growth was steady at 1.9 per cent.

Spending rose most in December in Cafés, restaurants and takeaway food services (up 1.1 per cent) and Food retailing (up 0.5 per cent).

Spending fell the most for Household goods (down 2.8 per cent), followed by Clothing and footwear (down 2.4 per cent), Department stores (-1.1 per cent) and “Other” retailing (down 0.1 per cent).

Spending fell in seven Australian states and territories in December, including the ACT (down 1.8 per cent), New South Wales (down 0.6 per cent), Victoria (down 0.5 per cent), South Australia (down 0.3 per cent),
the Northern Territory (down 0.3 per cent), Tasmania (down 0.2 per cent) and Queensland (down 0.1 per cent). But sales rose in Western Australia (up 0.1 per cent).

Sales by chain-store retailers and other large retailers fell by 0.3 per cent in December to stand 2.8 per cent higher over the year.

Retail trade – December quarter

In real (inflation-adjusted) terms, retail trade rose by 0.1 per cent in the December quarter after a 0.2 per cent rise in the September quarter.

Strongest growth in the quarter was by Clothing and footwear (up 2.7 per cent), and Department stores (up 0.7 per cent).

Sales fell for “Other” retailing (down 0.5 per cent), Cafes, restaurants and takeaway food services (down 0.5 per cent), Household goods (down 0.3 per cent) and Food retailing (down 0.2 per cent).

Prices across retailers rose by 0.6 per cent in the December quarter after a 0.4 per cent lift in the September quarter. It was the strongest growth rate in two years.

Price increases: Household goods retailing (up 1.1 per cent); Food retailing (up 1.0 per cent); “Other retailing” (up 0.9 per cent); and Cafés, restaurants and takeaway food services (up 0.4 per cent).

Price decreases: Clothing, footwear and personal accessory retailing (down 0.2 per cent), Department stores (down 0.1 per cent).

Over the year to December, real (inflation-adjusted terms), spending on Newspapers and Books fell most, down 9.3 per cent, followed by Liquor retailing (down 1.4 per cent), “Other” Recreational Good Retailing (down 1.1 per cent) and Takeaway Food Services (down 0.5 per cent). Real spending rose the most for Clothing Retailing (up 5.8 per cent) and Pharmaceuticals, Comestics and Toiletry Retailing (up 4.7 per cent). 

International trade

The trade surplus rose to a two-year high of $3,681 million in December from $2,256 million in November (consensus: +$2,225m). It was the 12th successive surplus in 2018. The rolling annual surplus rose from $16.1 billion to a record-high $22.2 billion.

Exports of goods and services rose by 1.6 per cent (goods exports fell by 2.1 per cent).

Imports of goods and services fell by 5.7 per cent (goods imports rose by 0.1 per cent).

Exports were up by 16.2 per cent on a year ago, while imports were down 0.9 per cent.

Rural exports rose by 9.5 per cent. Rural exports fell due to a $291 million increase in cereal grains and preparations.

Non-rural goods rose by 0.1 per cent. But gold exports fell by 56.7 per cent in December after rising by 59.6 per cent in November.

Within imports, consumer imports fell by 7.2 per cent; capital goods imports fell by 15.4 per cent and intermediate goods imports fell by 6.1 per cent.

Consumption goods imports were down by 7.2 per cent on a year ago, capital goods imports fell by 8.2 per cent, but intermediate goods imports were up by 2.9 per cent.

The net services deficit rose from $322 million in November to $528 million in December.

Australia's annual exports to China rose from $115.64 billion in November to $117.52 billion in December – a new record high. Exports to China are up 18.0 per cent on a year ago. Exports to China account for 34.2 per cent of Australia's total exports – a new record high.

Australia's annual imports from China fell from a record-high $74.61 billion to $74.55 billion. Annual imports were up by 16.5 per cent on a year ago. Imports from China accounted for 24.5 per cent of Australia's total imports – a record high.

Australia's rolling annual trade surplus with China rose from $41.03 billion to a record high of $42.97 billion in December.

New vehicle sales

In January, 81,994 new vehicles were sold, down by 7.4 per cent over the year. In the twelve months to January, sales totalled 1,146,554 units, down 3.9 per cent on a year ago.

The Federal Chamber of Automotive Industries reported: “The January 2019 market of 81,994 new vehicle sales is a decrease of 6,557 vehicle sales or -7.4 per cent on January 2018 (88,551) vehicle sales. January 2019 (25) had the same number of selling days as January 2018 and this resulted in a decrease of 262.3 vehicle sales per day.”

What is the importance of the economic data?

The Bureau of Statistics’ Retail trade publication contains the most current readings on the performance of consumer spending. The ABS surveys 500 ‘larger businesses’ and 2,750 ‘smaller businesses’. Retail trade covers spending at a broad range of retail outlets but excludes both petrol and motor vehicle sales. A weak retail trade result may point to a slowing economy as well weighing on the share prices of listed retail stocks. But retail trade
estimates can’t be assessed in isolation – it is important to look at the influences determining future trends in consumer spending, such as income, employment and confidence levels.

The monthly International Trade in Goods and Services release from the Bureau of Statistics provides estimates on exports and imports of physical goods (such as coal, beef and computers) and services (such as travel receipts). The balance of goods and services (BOGS) is a narrower description of Australia’s external position than the current account estimates. The import data is a
useful gauge of consumer and business spending while exports reflect global demand as well as domestic influences such as drought.

The Federal Chamber of Automotive Industries releases estimates of car sales on the third business day of the month. The figures highlight the strength of consumer spending as well as conditions facing auto & components companies. What are the implications for interest rates and investors?

Retail sales fell by the most in 12 months in December. In December 2017, sales also fell by 0.4 per cent. Consumers are bringing forward their spending in advance of Christmas taking advantage of e-commerce and online discounting. Bricks and mortar retailers will need to adapt.

Australia recorded its biggest trade surplus in two years. Chinese demand for Australia’s goods and services remains at record highs. Imports did weaken during December, perhaps a sign of a softening in domestic demand.

The slowdown in vehicle sales is linked to the slowdown in home prices.

CommSec expects interest rates to be unchanged for the foreseeable future.

Published by Ryan Felsman, Senior Economist, CommSec
Archive
Markets
Index: Points Change Percent

PLEASE SUPPORT OUR SPONSORS, AUSTRALIA'S LEADING BROKERS:



© Copyright TheBull.com.au. All rights reserved.