• The NAB Cashless Retail Sales Index rose 0.9% in December on a month-on-month basis, up from a 0.4% (revised) increase in November. However, our data mapping suggests that the official ABS measure of retail sales will record a negative print in December, forecast to be down 0.3%.
• These results suggest that retail spending for Christmas 2018 was fairly weak. While some Christmas spending was brought forward to November by way of the ever more popular Black Friday and Cyber Monday sales, (the ABS m/m retail print for November was +0.4%) the reality is that consumers were reluctant to spend over Christmas and that underlying spending is lacklustre, underlined by a number of retailers starting the Boxing Day sales before Christmas itself.
• The advent of the Black Friday sales is likely changing the seasonal composition of Australian retailing. Indeed our forecasts for ABS spending in December 2016 and 2017 were both negative. However, it appears that there is more to the decline this year than a simple bringing forward of spending to November. Our forecast for a negative ABS print is driven by a contraction in four of the six major sectors (household goods, department stores, other retailing and cafes, restaurants and takeaways) on a month-on-month basis.
• The NAB Cashless Retail Sales Index was up 9.9% year-on-year in December. Year-on-year growth is positive for all six NAB Cashless Retail Index major industry groupings. Cafes, restaurants & takeaways remains the fastest growing category (15.9% y/y), followed by food (10.0%), department stores (7.4%), clothing and footwear (7.1%), household goods (5.0%), and finally other retailing (4.7%). For more detail see Charts 3, 7 & 8.
• The NAB Cashless Retail Index is broader than the NAB Online Retail Index and measures all cashless retail spending by consumers using debit and credit cards (both in person and online), BPAY and Paypal. The index is derived from personal transaction data from NAB platforms (around 2 million transactions per day) and offers a 2-3 week lead on ABS retail trade data. Likely reflecting the increasing popularity of online and contactless payments, the NAB Cashless Retail Index has continued to outpace the ABS measure of retail sales (9.4% y/y versus 2.8% y/y in November).

NAB Chief Economist, Alan Oster commented:

The NAB Cashless Retail Sales Index recorded 0.9% month-on-month growth in December. However, our mapping of the “official” ABS measure points to a print of -0.3% for December, which would be the worst result in a year if it transpires.

While the increasing popularity of the Black Friday and Cyber Monday sales is arguably bringing forward some Christmas spending to November, the ABS print of 0.4% for the month largely reflects a business as usual November. This suggests that the weak December read at least partly reflects underlying weakness in the retail sector.

Low wage growth, high personal debt levels and a weakening housing market – particularly in Sydney and Melbourne – have made consumers reluctant to spend on non-essentials. The Australian economy is still growing, although we revised down our GDP growth forecasts somewhat last month, as wealth effects of lower house prices and slower housing construction bear more on the outlook. We now no longer expect any movement in the cash rate until the second half of 2020.

Furthermore, consumer preferences continue to trend towards experiences at the expense of traditional consumer goods. Cafes, restaurants and takeaways remains the strongest performer on a year-on-year basis, followed by food, while department stores, clothing and footwear, household goods and other retailing are growing much more slowly.

For more information, please refer to the attached report:

NAB Cashless Retail Sales Index December 18