NAB Cashless Retail Sales Index: June 2020

Our data mapping points to a moderate fall in June, following massive swings in March, April and May suggesting there has been some stabilisation in retail sales.

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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. Listen now.

Highlights:

  • Our data mapping points to a moderate fall in June, following massive swings in March, April and May suggesting there has been some stabilisation in retail sales. We forecast that the ABS retail trade measure will fall 2.8% in June, having jumped an extraordinary 16.9% in May.
  • Our data mapping equations have struggled to process the simply unprecedented swings we have seen this year in Australian retail sales, with last month no exception. We had forecast a 5.5% increase (revised to 15.1%) but the ABS printed a gain of 16.9%. With increasing signs of stabilisation in the sector, we now expect less volatility in the ABS data.
  • If retail sales stabilise at this level it will be a very encouraging result and well above our expectations of a just a few months ago. That said, some parts of the retail sector – notably restaurants and pubs will continue to face challenges while new (Victorian) restrictions continue.

NAB Chief Economist, Alan Oster commented:

Our internal data are now showing a stabilisation of retail sales at a surprisingly buoyant level, particularly given the circumstances. While some parts of retail will remain under major pressure (for example businesses affected by Melbourne’s lockdown, particularly in food service) overall the sector has outperformed our expectations, particularly given the weakness in the Australian economy.

The June Monthly Business Survey has also picked up improved retail activity. Notably, retail business conditions have risen to be close to the top of the pack – a significant turnaround from persistently weak outcomes prior to the pandemic.

Whether this can be sustained remains to be seen. While the economy has been hit very hard by the virus, it has also bounced back much faster than we expected. That said, unemployment remains very elevated and retail spending has likely been underpinned partly by the substantial – and in our view very welcome – increase in government income support. We expect that this support will continue (in some form) beyond September.

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