Highlights

• Our data mapping points to further moderation in ABS retail sales growth in March – up just 0.1% m/m in our estimation. The ABS measure has experienced a slowdown in recent months, culminating in a negative print last month (well below our estimates at the time).
• While our forecast for March remains positive, it is important to note that our forecasts have outperformed ABS prints recently, suggesting that there may be some underlying downside not captured by our mapping equations at present. With much of life in Australia now returning to something resembling “normal”, consumption patterns are changing too. This points to some downside risk as the pandemic-induced retail boom in sectors like household goods subsides.
• The March NAB Monthly Business Survey reported very strong retail conditions, but weaker confidence. This may point to a moderation in retail sector conditions as consumer spending patterns normalise.

NAB Chief Economist, Alan Oster commented

2021 is already showing signs that the retail sector is returning to something resembling “normal”, which is likely to see lower retail spending in areas like household goods, electronics and similar sectors. The latest NAB Monthly Business Survey is already showing signs that retailers can see this transition coming, with confidence lower than current conditions.

Our mapping equations for ABS retail sales for March suggest that while this moderation is underway, headline retail sales remain positive. However, there are some signs that our mapping equations may be over-estimating the ABS measure at present. Other NAB data indicators are already pointing to some softness in parts of the retail sector.

Overall, the Australian economy is recovering strongly and has out-performed many forecasters’ expectations. Unemployment has fallen quickly, although wage growth remains very subdued. Ultimately, wage growth will need to pick up from here if we are to see a sustained recovery in retail beyond the pandemic-induced surge.

For more information, please see the NAB Cashless Retail Sales Index – March 2021