Australia’s retail sales drop in December, Q1 2017 average growth likely to be slow

Australia’s retail sales came in quite below expectations in December. On a sequential basis, the retail sales dropped 0.1 percent in December, as compared with market expectations of 0.3 percent growth. In November, the retail sales had risen 0.1 percent. This implies that the rebound seen through September and October did not continue into the end of the year.

Retail sales expanded 3 percent on a year-on-year basis in December as compared with the 3.2 percent year-on-year growth in November. Trend retail sales growth was stable at 0.3 percent in sequential terms; however, on the year-on-year basis, trend rate dropped to 3.2 percent.

Despite given the strength of the housing market, hardware, building and garden supplies sales dropped sharply by 6.6 percent month-on-month. This softness might be due to the closure in December of the Masters chain of hardware stores.

Clothing and weak goods sales rose strongly by 1.4 percent sequentially, building on the 2.3 percent growth in the earlier month, noted ANZ. Department store sales increased 0.3 percent sequentially. Large store sales dropped 0.2 percent in sequential terms in the month, whereas sales at small store increased 0.1 percent sequentially.

Region wise, sales in Victoria, NSW and the ACT came in surprising weak, falling 0 .4 percent, 0.3 percent and 0.7 percent respectively. Meanwhile, sales in Queensland were flat and rose 0.6 percent sequentially in WA.

While monthly retail sales came in softer than anticipated, quarterly retail sales volumes came in line with market projections, rising 0.9 percent as compared with an upwardly revised 0.1 percent rise in the third quarter. Sales volumes came in strong for clothing, household goods and department stores. In year-on-year terms, retail volumes grew 2 percent, a rise from 1.5 percent in the third quarter. However, the subdued monthly sales in November and December imply that the first quarter average growth is expected to be slow, stated ANZ.

Retail price inflation was up 0.3 percent quarter-on-quarter in the December quarter after rising 0.7 percent in the third quarter. Food prices grew strongly by 1 percent, whereas prices of clothing and soft goods dropped 0.7 percent sequentially.

“While the rise in retail sales volumes in Q4 is reasonably solid, the faltering momentum in the monthly data suggests the need to monitor consumer spending closely”, added ANZ.