Retail sales disappoint in March

Sarah Turner
AFR
May 8, 2018

Australian consumers remain unwilling to open their purses judging by the latest retail sales figures that showed no growth at all in March.

Data released on Tuesday underlined a wider picture of an economy showing gradual growth and a central bank stuck on the sidelines.

On a seasonally-adjusted basis, retail sales were flat in March at $26.4 billion, compared to a 0.6 per cent increase in retail sales in February and a 0.2 per cent increase in January. Economists had pencilled in a rise of 0.2 per cent.

During the month, grocery was the only sub-sector to show seasonally adjusted sales growth, advancing 0.7 per cent. Cafes, restaurants and takeaways fell 0.8 per cent, household goods fell 0.3 per cent, department store sales declined 0.5 per cent, and clothing, footwear and personal accessories slipped 0.2 per cent.

Economists described the retail sales data for March as “weaker than expected,” “disappointing at face value” and “soft all round.”

“I don’t think there was too much that was redeeming about the data,” said Su-Lin Ong at RBC Capital Markets. 

“Outside of food, every component of the data fell,” she said, noting that there was particular weakness in key discretionary components of the data, such as department store sales.

“It looks like its been a pretty soft start to the year for the consumer,” she said, while cutting her GDP forecast for the first quarter to 0.6 per cent.

Kate Hickie at Capital Economics agreed that the data was weaker than markets were expecting.

“It confirmed what we already thought,” she said – that the labour market had started to soften and consumers would struggle as the housing market slowed.

“We think that GDP growth will be around 2.5 per cent this year,” she said, and has pencilled in interest rates to stay on hold at 1.5 per cent until the second half of 2019.

“I think that the Reserve Bank will be reluctant to jump on one month’s figures but will probably be a bit disappointed.”

Mark Ronan, chief executive of bedding retailer Adairs, said he hoped there would be some measures in the budget aimed at stimulating spending, but wasn’t relying on it.

“We focus more on what we can control around product and execution rather than external factors,” he said.

Shoppers had become more discerning and selective and were no longer splashing the cash, he said. “We have to be at the top of our game because the consumer is happy to wait or go somewhere else.”

Mr Ronan said the bedding retailer had a “very good March” and the data for March did not reflect trading in his stores.

Annette Beacher at TD Securities, however, said that while the data was disappointing at face value consumer spending hadn’t dropped below zero.

“It’s 60 per cent of GDP, so it’s important,” she said, “but it’s not falling”.

Ms Beacher said infrastructure, public spending and exports were also important contributors to GDP growth and continued to expect annual GDP growth to hit 3 per cent this year, with the consumer accounting for about 1.5 per cent of that growth.

However, she said that for GDP to improve to, say 4 per cent, it would require consumer spending to pick up from their current levels, which were low by historic averages.

The currency markets did not take the retail sales data for March particularly well, with the Australian dollar dropping around 0.4 per cent after the release of the data. It was trading at around US75.01¢ against the greenback in the afternoon.

with Sue Mitchell 

Read more: http://www.afr.com/news/economy/retail-sales-disappoint-in-march-20180508-h0zsrj#ixzz5F2fomsQt

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