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 below.

Highlights:

• Unfortunately, our data mapping brings a very weak forecast for retail trade for April. We forecast that ABS retail trade will fall 0.5% a month on month basis, the weakest forecast in our series going back some half a decade. While the March ABS print was reasonable – up 0.3% – we have now made downward revisions to our mapping of the ABS data for March, which is now down to 0.0%.
• Contrary to our forecast for the ABS print, our cashless retail sales index improved in April, gaining 1.2% compared to a 0.5% fall in March on a month on month basis. It could well be that the timing of Easter and ANZAC day is affecting the seasonal adjustment process. On a year on year basis the index improved to 6.6% in April.

NAB Chief Economist, Alan Oster commented:

This is clearly a very weak result, which further underlines our broader concerns about the Australian economy. Other NAB data also show weakness, notably the April NAB Monthly Business Survey, which showed that the bounce in conditions in March was short-lived, as we expected. While trading and profitability have previously dipped below average, April is the first time the employment index has shown signs of weakness. While employment has previously held up better – similar to official data – the impact of slowing activity and a weak outlook may now be flowing through to the labour market. This does not bode well for consumer sentiment or retail sales.

Our latest forecasts are for below trend growth and below target inflation, combined with little further improvement in the labour market. Consequently, we expect the RBA to cut rates twice in 2019, taking the cash rate to a new record low of 1%. However, with the RBA still looking for an improvement in the labour market and monthly figures often volatile, we recognise that the timing of the first cut will be especially data dependent.  That said, as announced last week we have moved forward the timing of our expected rate cuts to June and August 2019.

For more information, please refer to the NAB Cashless Retail Sales Index: April 2019