Highlights

• Our data mapping points to the ABS retail sales growth stalling in May, up just 0.1%on a month-on-month basis. The ABS printed monthly growth of 1.1% in April, while we forecast 2.0% at the time, since revised to 1.4%.
• Last month we flagged our increasing scepticism as to whether retail growth will continue, reflecting more “normal” pre-pandemic conditions returning. Our data suggests that this trend is well underway, pointing to weaker consumption overall. Indeed, our weekly tracking data (published fortnightly) suggests this slowing trend accelerated towards the end of the month, and not just in Victoria.
• While household goods, department stores and other retailing were key drivers of growth last year (reflecting consumers spending more time at home), our data mapping shows these sectors recording flat to negative monthly growth in May. Clothing and footwear and hospitality, which suffered greatly in 2020, had stepped in earlier this year to fill the gap, but our data mapping points to a weak print in these areas, particularly for clothing and footwear.

NAB Chief Economist, Alan Oster commented

A month ago, life in Australia was very close to pre-pandemic “normal”, and while this illusion has been shattered in Victoria, retail trends continue to point to the COVID-induced consumer boom having largely run its course. Rather the drivers of growth are turning to dwelling and plant and equipment investment and manufacturing – probably reflecting the turnaround in dwelling construction.

While the Australian economy continues to outperform, consumer spending is increasingly taking a back seat as a driver of growth. The NAB Monthly Business Survey again showed business conditions at a record high in May, with continued strength in the retail sector. That said, retail and wholesale were relatively less confident than other sectors in the survey.

While good employment news continues, this is yet to translate to higher wage growth, which is coming off record lows set in 2020. Without sustained wage growth, sustainable ongoing growth in the retail sector is likely to remain elusive.

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