NAB Cashless Retail Sales Index: March 2019

The strong ABS print in February exceeded our expectations and indeed those of the market. It’s fair to say that we are sceptical whether such strong growth will continue.

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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. To listen, just click the link below.

Link opens in Soundcloud

Highlights:

  • We forecast that ABS retail trade for March will grow moderately, up 0.3% on a month on month basis. While Christmas and January were weak, the February ABS print was very strong – up 0.8%. This exceeded our forecast at the time, which was 0.3% (now revised to 0.5%). The strong ABS print was underlined by a particularly strong result for department stores and food, which, on our data, did not continue in March.
  • The NAB cashless retail sales index previously grew faster than the ABS series, reflecting a shift from cash to cards. However the trend has substantially changed in recent months. On a year on year basis, the NAB series was up only 4.3% in March, compared to 8.3% as recently as January. This stark change is shown in chart 1 (refer attached report). We will be further investigating why the trend has changed. One possible cause is that cashless technology is reaching saturation point and is now no longer outpacing overall transactions.

NAB Chief Economist, Alan Oster commented:

The strong ABS print in February exceeded our expectations and indeed those of the market. It’s fair to say that we are sceptical whether such strong growth will continue. Our model forecasts a somewhat more modest 0.3% gain in March, although if it turns out that the February ABS print overshot, there is something of a downside risk. Other NAB data, such as the Monthly Business Survey, continue to show challenging conditions for the retail sector. The March Business Survey found that retail remained the weakest industry in the survey, although retail prices did strengthen slightly.

Our outlook for the Australian economy ultimately sees the consumer still struggling with their cash-flow and hence with any discretionary spending. Also house price falls will see construction activity fall another 20% over the next two years. In our latest outlook, we now expect Sydney house prices to decline by around 20% from peak to trough, while Melbourne is expected to fall around 15%. That said infrastructure spending, NDIS spending in public consumption and LNG exports will support the economy.

For more information, please refer to the NAB Cashless Retail Sales Index: March 19