Below trend growth to continue
This result points to a modest improvement in retail sales, albeit from a poor result last month.
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. To listen, just click the link below.
NAB Chief Economist, Alan Oster commented:
This result points to a modest improvement in retail sales, albeit from a poor result last month. Fundamentally though, we remain concerned that there has been little growth in real consumption so far in Q3, with limited prospects for pick-up in the short term.
While the retail sector improved in the August NAB Monthly Business Survey, it remains the weakest industry in the survey, with conditions still deeply negative. So far, stimulus provided by policy makers has had limited impact or has been unable to offset the countervailing headwinds faced by the household sector. We now see the RBA cutting rates at least twice more, down to 0.5% by February 2020.
In our latest forecasts, we expect household consumption growth to improve, albeit modestly and well below average. We expect the recent trend in consumption growth limited to ‘essentials’, largely in the form of services, to continue. With wage growth remaining weak, sluggish household income growth is likely to remain a headwind to consumption growth. High debt levels, low savings rates and stretched budgets on the prior run up in essentials prices are likely to also continue to weigh until income growth sees a substantial lift. This does not bode particularly well for the retail sector.
For more information, please see the NAB Cashless Retail Sales Index August 19
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