Growth, inflation and labour market all easing
We forecast that ABS retail trade will return to growth – albeit modestly – in January 2019.
In this month’s podcast, you’ll hear from senior members of the NAB Group Economics team who’ll provide an overview of the major drivers of the NAB Cashless Retail Sales Index.
• We forecast that ABS retail trade for January will return to growth – albeit modestly – in January 2019, following a weak Christmas period (the ABS print for December was -0.4% m/m, we forecast -0.3%). Overall we forecast ABS retail trade to increase 0.3% m/m sa in January. That is, broadly flat over the Xmas / New Year period.
• The NAB cashless retail sales index, which generally grows faster than the ABS measure, gained 0.6% m/m in January. Growth slowed on a year-on-year basis, standing at 9.3%. Cafes, restaurants and takeaway remain the standout performer, up 15.4% y/y, although this is the weakest growth for the sector for a year. Food is the second strongest sector (up 8.8% y/y), followed by department stores, clothing and footwear, household goods and other retailing.
• The ACT regains top spot among states and territories (up 10.2% y/y), followed by Western Australia (9.7% y/y), while New South Wales and Victoria are equal third (9.5% y/y). South Australia is just behind while Queensland remains the weakest performing state.
NAB Chief Economist, Alan Oster commented:
While our forecasts for ABS retail trade suggest that the New Year will bring a return to growth following a weak Christmas period for retailers, the overall picture is of a sluggish retail sector. In January the improvement largely reflected better household goods and other retailing.
This is reflected in other NAB data, such as the NAB Monthly Business Survey. The January Survey shows conditions in the retail sector continuing to weigh most on the business conditions index, and the industry continuing to be the only to record negative conditions (-14 seasonally adjusted and -11 in trend terms). Surveyed sub-industry data suggest that conditions are now negative across all categories of retailing.
The retail sector remains close to recession levels, with consumers unwilling to spend in a low wage growth and high debt environment, potentially compounded by negative wealth effects from housing. Consequently, a pick-up in wage growth is critical for the retail sector. Our latest forecasts are for wage growth to continue to show a gradual rise over the next two years, but remain well below the 3%+ prints seen in the lead up to the GFC.
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