Highlights

• Our data mapping points to slower growth in March, following a strong February. We see the official ABS measure gaining 0.2% on a month-on-month basis in March, having gained 1.8% in February.
• March data has been subdued following February’s spending spree that emerged in the wake of the omicron peak. February saw very strong results for hospitality as Australians returned to pubs, restaurants and bars, but March has seen this pared back somewhat. However, our weekly tracking data remains reasonably encouraging, although retail and hospitality have been a little weaker of late.
• March saw a record petrol price spike as well as broader concerns around inflation and forthcoming interest rate rises. While petrol has now retreated from its earlier highs, we see the RBA hiking rates as soon as June. This may affect consumer sentiment, particularly for discretionary goods.

NAB Chief Economist, Alan Oster commented

March has seen smoother retail prospects when compared to the very choppy conditions across January and February, with our forecast pointing to moderate growth in the month. Overall, retail businesses continue to perform well, although the rapid growth of the last two years is unlikely to be repeated.

There have been heightened concerns around inflation recently, particularly for petrol and food. While petrol is easing somewhat following the 22c excise cut announced in the budget, broader inflationary risks remain. We now see the RBA lifting off mid-year as a result.

That said, the NAB Monthly Business Survey reported very strong business conditions in March, with the retail sector leading the gains to record a massive 23 point gain in conditions. Much has been made of inflationary risks and this month we provided more detail on business costs. Overall, business cost and price growth measures reached record levels in the survey. Retail recorded the lowest labour cost growth of any industry (up 1.7% at a quarterly rate, compared to 2.1% overall) but slightly higher purchase cost growth than business overall (3.5% and 3.4% respectively). Retail price growth stood at 2.3% at a quarterly rate, compared to 1.7% for all businesses.

For more information, please see the NAB Cashless Retail Sales Index (March 2022)