Australia's weak June retail sales highlight need for ultra-easy monetary policy

Australia's retail sales disappoint again in June, rising by just 0.1 percent, to $25.044 billion after seasonal adjustments. Australia’s nominal retail sales growth continued the run of soft outcomes despite a bounce-back in clothing sales. On a three month-end annualised basis, retail sales were up 1.9 percent in June compared with 2.8 percent in May. The year-on-year growth rate slow to just 2.76 percent, the weakest seen since July 2013.

Retail volumes were also weaker than expectations, rising by 0.4 percent q/q in Q2 compared with 0.5 percent q/q in Q1. In annual terms, retail volumes have continued to moderate, with y/y growth slipping to 1.9 percent in Q2 from 2.3 percent in Q1.

It was worth noting that retail sales in both NSW and Victoria fell in June by 0.2 percent m/m and 0.1 percent m/m, respectively. Spending in these two states has underpinned retail sales over the past year.

Retail price inflation remained weak, with prices rising 0.2 percent q/q in Q2 compared with 0.1 percent q/q in Q1. The impact of competition was again highlighted with prices falling for clothing & soft goods in department stores and ‘other’ retailers. Prices are just 1.3 percent higher than a year ago.