Australia’s retail sales growth slows in May

Australia’s retail sales in seasonally adjusted terms grew 0.2 percent on sequential basis, coming below market projections of 0.3 percent. On a year-on-year basis, retail sales growth decelerated to 3.4 percent in May, as compared with 4.1 percent at the end of last year.

Clothing sales, in seasonally adjusted terms, dropped 1.4 percent in May, following a downwardly revised decline of 1.5 percent in April.

This is in line with anecdotes of weak winter clothing sales. Cooler weather in June might see an improvement in clothing sales. Sales might have also been affected by higher petrol prices. Pump prices rose 2.4 percent in May.

In seasonally adjusted terms, Australia recorded a rise of 0.7 percent in food retailing, 1.4 percent growth in other retailing, and 0.3 percent rise in cafes, restaurants and takeaway food services, stated Australian Bureau of Statistics. Growth was flat in department stores, whereas household goods retailing declined 1.1 percent in May.

Region wise, retail sales grew in New South Wales and Victoria by 0.7 percent and 0.6 percent month-on-month respectively. This indicates that both the regions continue to be main drivers of strength in the economy, noted ANZ. Meanwhile, Western Australia and Queensland recorded a drop in sales of 0.7 percent and 0.4 percent month-on-month respectively.

At a first glance, the monthly retail sales data for May seems modest; however, it has a downward bias flowing from weak prices. It might be tough to return to a more rapid growth, noted St George Economics in a research report. Wages growth continues to be weak, while growth in population is lower than in earlier years.

However, volumes of sales are expected to stay reasonable. Region wise differences are expected to remain as long as their growth rates and activity levels differ, added St George Economics.

Even if consumer sentiment has declined slightly in the recent weeks, it continues to be well above average. Moreover, the housing market also continues to be strong. If it is sustained, retail spending should be underpinned by this in the near term. However, the uncertain political scenario domestically and abroad is expected to be a drag on confidence in the future, according to ANZ.