Cashless Retail Sales Index: August 2020

Retail sales have been resilient recently, given restrictions on consumer activity and the large hit to the Australian economy.

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This month we continue our podcast series to accompany the NAB Cashless Retail Sales Index. It’s a short, 10 minute podcast, designed to give you a quick summary of the major drivers of the index this month. Listen to the full podcast now. If listening on a mobile device, click listen in browser.

Highlights:

  • Our data mapping points to the ABS retail sales measure falling 2.4% in August. July outperformed our expectations (up 3.2%, we forecast -0.7% at the time, since revised). The wild swings of earlier in the year seem to have abated, although Victoria remains weak on account of the second wave of COVID-19 and restrictions implemented to manage it.
  • Our data mapping equations have struggled to process the simply unprecedented swings we have seen this year, both at the aggregate level and across the different sub-sectors, in Australian retail sales.
  • Retail sales have been resilient recently, given restrictions on consumer activity and the large hit to the Australian economy. With a prolonged period of higher unemployment on the horizon, and government assistance scheduled to partly wind back from September, risks for the sector remain.

NAB Chief Economist, Alan Oster commented:

The retail sector has remained resilient overall, although some parts have performed much better than others. Clothing and footwear and cafes, restaurants and takeaways have struggled, while household goods, department stores, food and other retailing have performed strongly, a pattern of consumption reflecting consumers staying home.

In a somewhat surprising turn of events, retail has gone from the weakest performer in the NAB Monthly Business Survey last year to the strongest in August (followed by wholesale).

However, the Australian economy remains in a bad shape, with Q2 National Accounts recording a bigger than expected drop in GDP. While our latest forecasts point to a slight positive in Q3, Q4 could well go backwards again. We now see unemployment reaching 10% in early 2021. With unemployment so high and government support set to fall, consumer spending will be increasingly constrained, particularly on the types of discretionary goods that have propelled the sector this year.

For more information, please see the NAB Cashless Retail Sales Index August 2020