Retail sales rose a sedate 0.3% in October, as online spending hit a record high and spending rose on clothing and footwear but fell in cafes, restaurants, and takeaway food services.
The Australian Bureau of Statistics said October’s rise followed a revised increase of 0.1% in September 2018 (originally reported at a 0.2% rise).
Spending online jumped sharply as well and was the highlight of what was still a flat performance for the month.
The ABS said online spending was 5.9% of retail sales in the month on an original basis (estimated at $27.407 billion. That equates to $1.61 billion). The Bureau said that was up from a share of 4.7% of original retail sales in October 2017, which equates to $1.24 billion.
Seasonally adjusted retail spending was $26.99 billion, up from $26.89 billion in September, according to the ABS.
The figures though confirm the retail sector remains sluggish, with consumer spending weak, as we saw in the September National Accounts and GDP numbers.
Falling house prices in Sydney and Melbourne, slow or no wage growth and a reluctance by people to borrow saw GDP rise 0.3% in the quarter.
“Clothing, footwear and personal accessory retailing (2.6 percent) led the rises” the ABS’s Ben James, Director of Quarterly Economy Wide Surveys said in yesterday’s statement.
“Rises were also seen in Household goods retailing (0.6 percent), Other retailing (0.5 percent), Food retailing (0.2 percent), and Department stores (0.4 percent). These rises were offset by a fall in Cafes, restaurants and takeaway food services (-0.9 percent)”.
“In seasonally adjusted terms, there were rises in Queensland (1.1 per cent), Victoria (0.6 per cent), Western Australia (0.6 per cent), the Australian Capital Territory (1.1 per cent), South Australia (0.1 per cent), the Northern Territory (0.6 per cent) and Tasmania (0.1 per cent). These rises were offset by a fall in New South Wales (-0.4 percent), with poor weather impacting turnover for some industries.
“The trend estimate for Australian retail turnover rose 0.2 percent in October 2018, following a 0.2 percent rise in September 2018. Compared to October 2017, the trend estimate rose 3.5 percent,” according to the Bureau.
In a comment, the AMP’s Chief Economist, Shane Oliver pointed out that “Retail sales are falling on a trend basis for household goods and department stores reflecting weak traditional discretionary spending but rising in other areas.”
“We see retail sales growth being weak over the year ahead (averaging around 2.5-3% annual growth) as jobs growth slows, wages growth remains weak and falling house prices weigh on consumer spending via a negative wealth effect making households want to increase their saving rate (in contrast to the falling trend in the saving rate seen in recent years). Weak pricing power will also weight on nominal retail sales growth.”
With this sort of weakness and outlook, it’s no wonder investors are again sceptical about the retail sector, as we have seen this week.
Meanwhile, Australia’s trade balance for October was $2.316 billion, well under the optimistic $3 billion the market had been expecting and down from September’s revised $2.940 billion.
This reflects a 3% rise in imports (with capital goods imports up 8%) against just a 1% gain in exports. But rural exports were down because of the drought, falling by $277 million or 7% and exports of non-monetary gold fell $355 million or 24%.
Importing and exporting non-monetary gold is a very volatile area and bounces around a lot each year. Non-rural exports were up more than $1 billion or 4% in the month.
