Six factors that led to retail sales growth touching low levels

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Australian Economy, Uncategorized

We have lately witnessed a gradual downtrend in the retail sales growth as depicted in the May 2016 data as per the Australian Bureau of Statistics (ABS). Particularly, only 0.2% surge was seen in May 2016 following the rise of 0.2% in April 2016 and a rise of 0.2% in March 2016. Market believed to have 0.3% rise following April’s data. The seasonally adjusted estimate rose 0.2% in May 2016 post the rise of 0.1% in April 2016 and a rise of 0.4% in March 2016.

The data depicted that other retailing saw a 0.5% jump with food retailing up 0.1%, Cafes, restaurants and takeaway food services up 0.4% and clothing, footwear and personal accessory retailing up 0.3%. On the other hand, Household goods retailing was flat along with Department stores in trend terms in May 2016. The trend showed improvement in terms of states and territories performance with New South Wales moving up 0.4%, Victoria up 0.2%, South Australia up 0.3%, Western Australia rising 0.1%, Tasmania up 0.4% and the Australian Capital Territory up 0.2%. On the contrary, Queensland and the Northern Territory fell by 0.2% in May 2016.

ret1

Monthly turnover (Source: Australian Bureau of Statistic)

Overall, the annual pace of sales growth decelerated to 3.4% as opposed to 3.5% in April while total retail spending was $25.02 billion in May which is a rise from $24.98 billion in April.

The downtrend already caught attention in the month of April 2016 wherein the growth was of the order of 0.2% after seasonal adjustments. On year over year basis, the value of sales jumped up by 3.6% unchanged from the growth witnessed in March. Food retailing which contributes majorly to sales saw a drop of 0.3% with April being the third month in the past four months witnessing the food sales fall impacted by the disinflationary forces within Australia.

ret2

Retail – by state (Source: Australian Bureau of Statistic)

Following are the factors that seem to have affected the trend:

  • Challenging economic environment with disinflationary forces and fluctuating consumer spending
  • Seasonal conditions with low trading over the Easter holiday and weak winter clothing sales
  • Intense competition but lack of price pressure in retail
  • Record-low wage growth while growth in population has been lower than in earlier years
  • Constrained household income growth
  • Uncertain political scenario

Some experts believe that strong housing market with consumer sentiment staying above average can reinforce retail spending in the near future. However, the interplay of the above-stated factors is yet to be seen fully to evaluate the trend going forward.

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