Australia retail sales solid in June, recent strength unlikely to be sustained

Australia’s Retail sales rose 0.3 percent m/m in June, a solid outcome given the strength in the previous two months. Retail sales volumes were up a strong 1.5 percent q/q in Q2, the fastest pace since Q1 2013, supported by rises across all categories. However, retail price inflation remains weak, with prices falling by 0.1 percent q/q in Q2.

International competition continues to weigh on retail prices. Indeed, the only category to record higher prices was cafes, restaurants and takeaway food. The data sets up a solid base for Q2 GDP (to be released on September 6).

Annual growth in retail sales was steady at 3.8 percent y/y in June, while sales rose by 7.9 percent on a three month annualised basis. Retail sales fell in Victoria (-0.3 percent m/m), reversing two months of very strong outcomes. Sales rose in all other states and territories except the ACT.

Department store sales fell for the second consecutive month while food sales were flat in both May and June. Clothing sales rose by 0.8 percent m/m in June and are up just 1.7 percent y/y. Sales of household goods remain relatively strong, up 5.9 percent y/y in June, while café, restaurants and take away sales were also up a solid 5.6 percent y/y.

"We remain cautious about the outlook for consumption as households grapple with a variety of headwinds including weak wage growth, high indebtedness, slowing house price growth and higher energy bills – a sentiment echoed by the RBA," ANZ Research commented in its latest report.

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