NAB Cashless Retail Sales Index: February 2019
We forecast that ABS retail trade for February will grow for a second consecutive month, following a weak Christmas period and a subdued January ABS print.
- We forecast that ABS retail trade for February will grow for a second consecutive month, following a weak Christmas period and a subdued January ABS print (the ABS print for January was 0.1% m/m, we forecast -0.3% at the time, revised to 0.5%m/m). For February our Cashless Retail Sales Index implies growth of 0.3% in the month. The lower read compared to the January Retail Sales print, combined with weakness in our other indicators (such as the NAB Monthly Business Survey), makes us somewhat cautious about these results – and in particular there may be some downside risk to the Cashless estimate for February.
- The NAB cashless retail sales index, which generally grows faster than the ABS measure, gained 0.5% m/m in February. Growth continues to slow on a year-on-year basis, standing at 7.9%. Cafes, restaurants and takeaway remain the standout performer, up 14.4% y/y, although this is the weakest growth for the sector in 17 months. Food is the second strongest sector (up 8.2% y/y), followed by department stores, clothing and footwear, other retailing and household goods.
- NSW has overtaken the ACT as strongest performing state or territory (up 8.2% y/y), followed by the ACT (8.1% y/y), South Australia (8.0% y/y), Western Australia (7.9% y/y), Victoria (7.7% y/y) and finally Queensland – the weakest performing state on 7.0% y/y.
NAB Chief Economist, Alan Oster commented:
While our model output forecast for ABS retail trade suggests that the index will grow 0.3% m/m in February, frankly this is at odds with other data, such as the NAB Monthly Business Survey. The February Business Survey found that retail remained the weakest industry in the survey by significant margin and declined further from the previous month.
Ultimately, the retail sector remains at or close to recession levels, with consumers unwilling or unable to spend in a low wage growth and high debt environment, potentially compounded by negative wealth effects from housing. Consequently, the consumer’s balance sheet and wages growth in particular needs to accelerate to underpin faster retail sales. We doubt given the activity and employment outlook that that will happen.
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