Feb sales: 0.8%mth, 3.2%yr (mkt f/c 0.3%). Large non-food retailers drive gain, possibly affected by changing seasonal spending patterns.
Retail sales surprised significantly to the upside in February, a 0.8% gain coming very much against the run of play. Sales had risen just 0.1% in January after a 0.4% fall in December with very weak private sector business surveys suggesting conditions had remained difficult in February as well. The sales data instead showed a strong and relatively broad based gain, well above consensus forecasts of a 0.3% increase and taking annual sales growth back above 3% for the first time since October.
Some of the gain may be due to problems with adjusting for changing seasonality – the rising popularity of ‘Black Friday’ sales and shifting timing of post-Christmas sales has created some issues around retail estimates through this period. However, to the extent that this means the February gain is overstated it also implies that previous weakness was also being overstated.
The category detail showed strong gains for food (+0.8%mth, 4.9%yr), household goods (+1.1%mth, –0.1%yr), clothing (+1.6%mth, +3.6%yr) and department stores (+3.5%mth, +1.4%yr) the last three supporting the seasonal sale issue idea) with flat sales across other retail (+3.7%yr) and cafes & restaurants (+2.4%yr).
All major states recorded solid gains: NSW +0.6%mth, +2.4%yr; Vic +0.8%mth, +4.8%yr; Qld +1.4%mth, +4.1%yr; SA +0.7%mth, +2.0%yr; and WA +0.6%mth, +2.9%yr.
Looking by channel, online sales look to have posted a small 0.5% dip in the February month, implying an even stronger month for retail ex online (+0.9%mth) which had seen back to back monthly declines in Dec and Jan.
The breakdown by retailer size shows a particularly strong gain for large non-food retailers, sales up 2.2% in the Feb month to be up 3.7%yr. Large food retailers saw a more muted 0.7% gain in the month but remain the outperformers over the year, sales up 5%yr. Small retailers continue to struggle with a 0.6% decline in sales in Feb and sales barely up 0.5%yr – a result more in line with the very weak business survey reads in recent months.
Overall the better than expected February retail sales result removes a significant downside risk to the outlook with nominal retail sales now tracking a similar pace in the March quarter to that seen in the December quarter. That is still a weak pace but does not indicate a further step down on the slowing over the second half of last year.
