Australian retail sales remain stronger-than-expected in April; caution remains on consumer spending

Australian retail sales remained stringer-than-expected during the month of April, led by strong sales growth in cafes, restaurants and takeaway food. In contrast, sales of clothing fell sharply. Possibly the unseasonably warm weather impacted sales trends, and the warm weather extended into May.

Interestingly, despite ongoing moderation in house prices, spending on furniture and hardware related items rose strongly. New South Wales and Western Australia led the growth in April, but in annual terms, sales growth remains the strongest in Victoria.

Retail sales had a solid start to Q2, rising by 0.4 percent m/m in April. In annual terms, retail trade growth slowed to 2.6 percent y/y, from 3.2 percent y/y in March. Sales in three month-end annualized terms, however, accelerated to 4.3 percent, from 3.1 percent in March and just 0.8 percent in February.

Further, sales rose solidly in New South Wales (0.7 percent m/m) and Western Australia (0.7 percent m/m). South Australia was the only state to see a decline in retail sales (-0.6 percent m/m). Sales were very strong in the Northern Territory and also up solidly in Tasmania. In annual terms, Victoria continues to show the strongest growth, with sales up 4.7 percent y/y in April. 

"Despite the better-than-expected outcome, we remain cautious about consumer spending, particularly for discretionary items, given the slowdown in the housing market and high petrol prices," ANZ Research commented in its latest report.

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