Oct sales: flat%mth, 2.1%yr (mkt f/c 0.3%). Policy stimulus goes AWOL as consumer ‘spending strike’ continues.
Retail sales disappointed again in October, holding flat vs expectations of a 0.3% rise. The spending ‘strike’ of Q3 (see here) looks to have extended into Q4 with still no evidence of a meaningful boost from tax refunds or interest rate cuts – the combined value of which will be adding around $16.6bn to household disposable incomes over the year to June 2020.
The storetype detail showed a slight gain for food categories – basic food up 0.1% and cafes & restaurants up 0.4% – but declines across non food, down 0.3%mth on a combined basis with department stores and clothing both down 0.8% and household goods retail down 0.2%. Within household goods, the housing-related ‘furniture and floor coverings’ sub-category (25% of the overall category) has been particularly weak over the last year, sales contracting around 4%, reflecting the downturn in new dwelling construction and wider housing market correction.
By state, sales declined in in NSW (–0.2%), Vic (–0.4%) and SA (–0.5%) but posted gains in Qld (+0.4%) and WA (+0.2%). Annual sales growth is showing a more abrupt slowdown in Vic, dropping to a 6yr low, and is slowing in Qld and SA but has seen a sustained firming in WA.
Looking by channel, annual growth in online sales continues to hold in the 10-15%yr range, firming slightly since mid year but still well down on the on 20-30% pace sustained through 2017 and 2018. Sales via ‘traditional’ bricks and mortar stores has been slower, moderating to a 1.8% annual pace in recent months.
The breakdown by size continues to show small retailers bearing the brunt of the slowdown over the last year with sales in an outright contraction running at a –1.8% annual pace. Sales growth across larger retailers has been steadier, holding around 4-4.5%yr.
Overall this is yet a disappointing retail result indicating no boost from recent policy measures. Retail conditions remain very difficult – particularly for smaller retailers, those without online channels and in segments exposed to the downturn in housing. While November may have seen some improvement, with early reports suggesting ‘Black Friday’ sales have been well-attended, the signs are still decidedly mixed, weak vehicle sales suggesting consumers are still in ‘lock down’ mode with discretionary spending.
