Aug sales: 0.4%mth, 2.6%yr (mkt f/c 0.5%). Policy stimulus ‘cash splash’ barely a trickle for retailer so far.
The August retail update showed sales up 0.4% in the month. While this was broadly in line with the consensus forecast of a 0.5% gain it is a disappointing result given the scale of the policy stimulus boost to disposable incomes. The combined effect of income tax offset refunds and interest rate cuts is estimated to be adding around $16.6bn to household disposable incomes over the year to June 2020. Even allowing for a delayed response and a low pass-through to spending, August should have started to see a meaningful lift in spending. As it stands, the 0.4% gain suggests the ‘cash splash’ is barely a trickle so far.
The storetype detail was mixed at best: basic food retail up 0.4%, department stores and clothing faring better (up 1.1% and 1.8% respectively, albeit with the latter coming off a choppy few months), but household goods (0.5%) and ‘other retail’ (+0.3%) subdued and cafes and restaurants recording a back to back monthly decline (-0.3%). To the extent that there is any stimulus effect is looks confined to only some ‘small ticket’ discretionary spending categories.
Sales were subdued in most states, up just 0.3% in NSW and Vic, a touch firmer with a 0.8% gain in Qld. Over the last year there has been a clearer trend with sales growth slowing materially in NSW and Vic but lifting materially in Qld and WA.
Looking by channel, annual growth in online sales continues to hold in the 10-15%yr range, well down on the on 20-30% pace sustained through 2017 and 2018. Sales via ‘traditional’ bricks and mortar stores has been slower but steadier, holding around 2%yr throughout.
The breakdown by size continues to show small retailers baring the brunt of the slowdown over the last year with sales at a 2.5% annual pace. Sales growth across larger retailers has been steadier, picking up slightly in recent months to around 4.5-5%yr.
Overall this is a disappointing result suggesting that the stimulus cash has not been deployed and/or underlying conditions may be weaker than estimated (i.e. stimulus effects may have prevented an outright sales decline). Either way it marks a softer than expected trajectory for the consumer so far in Q3.
