NAB Cashless Retail Sales Index: January 2020

Our forecast points to a moderate rise in the ABS retail sales measure in January (+0.2% m/m), following an underwhelming end to 2019.

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This month we continue our podcast series to accompany the NAB Cashless Retail Sales Index. In this short podcast, you’ll get a quick summary of the major drivers of the index this month. Listen now.

 

Highlights:

  • Our data mapping suggests that the ABS retail trade measure will rise 0.2% m/m in January 2020. The ABS printed a 0.5% fall in December 2019, while we forecast -0.1% (revised to -0.2%).
  • The strong November and weak December ABS prints in part reflect the new and ever-expanding Black Friday sales, which have brought forward Christmas spending into November and are not yet fully captured in the ABS seasonal adjustment methodology. The underlying trend however, remains one of generally weak retail spending, reflecting a consumer burdened by high debt and slow wage growth. Unless these are remedied, it is unlikely that the retail sector will see a sustained uplift.
  • Last month, we flagged that the catastrophic bushfire season could damage consumer confidence in January and February. Based on this and other data (including our special bushfires survey), it now appears that this has not been a major factor outside fire-affected areas, although we remain concerned about the tourism sector, particularly given the emergence of strict travel restrictions due to coronavirus.

NAB Chief Economist, Alan Oster commented:

Our forecast points to a moderate rise in the ABS retail sales measure in January (+0.2% m/m), following an underwhelming end to 2019. While the negative December ABS print was partly about seasonal factors, the first result for 2020 shows that consumers remain reluctant to spend amid high debt and slow wage growth.

Last month we flagged that the bushfire season could damage consumer confidence in early 2020. While the fires have been absolutely devastating in many areas, they do not appear to have seen large second round consumer confidence impacts for capital city retailers.

Coronavirus has badly dented Chinese GDP growth and will be a headwind for Australia in Q1. As outlined in our latest economic forecasts, coronavirus, combined with bushfires, is likely to lead to a small negative GDP print for Q1 2020. Much of that will come from weaker consumption and a hit to tourism, education, commodity prices and incomes. We assume – and hope – that most of the bushfire and coronavirus downside will have passed by Q2. Nonetheless, we do not expect much stronger consumption growth until 2021.

For more information, please see the NAB Cashless Retail Sales Index January 2020.