Australia’s January retail sales data shows slow start to 2016 for consumer spending

Australia's retail sales grew in January by 0.3% from a flat result posted in December. However, it is a weak rise and lower than the consensus expectation of 0.4% growth. On a year-on-year basis, sales grew 4%, but tracked a slightly softer 3.6% annualised pace in terms of trend.  Food retail fell slightly by 0.2%, whereas department store sales fell 1%. Clothing remained flat at 1%, whereas consumer goods sales grew 1%. Cafes and restaurants increased 1% and other retail grew 1.4%.

The categories have posted 'patchy' results, as with the detail in the unexpected solid consumption figures in Q4 national accounts, the 'discretionary' vs 'staples' breakdown is not giving clear signals nationally, most likely implying severe divergences in consumer behaviour  throughout different states.

The breakdown of sales by size of business shows that small businesses are still experiencing weaker sales growth - although sales recorded a strong growth of 1.3% in January, they are up just 1.2% y/y. On the contrary, huge food retailers are witnessing annual sales growth of 4.3%, whereas other large retailers have posted a gain of 6.4%.

Overall, the retail sales data indicates a slow beginning to 2016 for consumer spending. The main source of the upside surprise in Australia's Q4 GDP was total spending that grew 0.8% q/q, lifting annual growth to 2.9% y/y. The soft data of January's retail sales is slightly mitigated by improved vehicle sales figure. According to industry figures, sales are moving towards a small increase in Q1.