• The NAB Cashless Retail Sales Index gained 1.1% in August on a month-on-month basis, following a gain of 0.7% (revised) in July. All of the six major categories grew in the month; four saw an improvement while one saw (household goods) steady growth and another (cafes, restaurants and takeaway) saw growth moderate.
• Our data mapping suggests that the official ABS measure of retail sales will be flat in August, following a flat ABS print in July. Our forecast last month was 0.1%, but has been revised to -0.1%.
• The NAB Cashless Retail Sales Index was up a more encouraging 11.5% year-on-year in August, although this is still potentially distorted by special factors from late-2017, including the new to Australia Black Friday sales.
• Year-on-year growth is positive for all six NAB Cashless Retail Index major industry groupings. Cafes, restaurants & takeaways remains the fastest growing category (17.9% y/y), followed by food at 11.7% y/y, household goods (9.9%), department stores (9.4%), clothing and footwear (7.6%) and other retailing (7.4%). For more detail see Charts 3, 7 & 8.
• The convergence in retail spending patterns across Australia, which has been present for some months, remains. While the ACT remains the strongest performer in the monthly data, but growth in NSW, Vic, Qld, SA and WA was again in a 0.2pp range a monthly basis. NSW, which had shown weakness in May and June, was equal second best performer in August (along with Victoria and Western Australia).
• The NAB Cashless Retail Index is broader than the NAB Online Retail Index and measures all cashless retail spending by consumers using debit and credit cards (both in person and online), BPAY and Paypal. The index is derived from personal transaction data from NAB platforms (around 2 million transactions per day) and offers a 2-3 week lead on ABS retail trade data. Likely reflecting the increasing popularity of online and contactless payments, the NAB Cashless Retail Index has continued to outpace the ABS measure of retail sales (10.1% y/y versus 2.9% y/y in July).

NAB Chief Economist, Alan Oster commented:

The NAB Cashless Retail Sales Index strengthened in August, recording 1.1% month-on-month growth – its best result since March 2018. However, our mapping of the “official” ABS measure points to another lacklustre result. The ABS recorded a flat print in July and our data suggests that this will occur again in August.

While the monthly data are volatile; we continue to observe weakness in the retail sector in other data, such as the NAB Monthly Business Survey. While retail business conditions rose in August, the sector remains the weakest in the survey and the only one to record negative conditions. That said, retail prices improved in August, up 0.9% at a quarterly rate.

Wage growth has been weak for some time, dampening consumer sentiment. However, our forecasts point to a pick-up in wage growth, in line with our expectation of moderately lower unemployment. On the other hand, falling house prices – particularly in Sydney and Melbourne – could begin to act as a dampener on retail spending.

The convergence we have seen in cashless retail sales growth across Australia continued in August. While the ACT is the fastest growing jurisdiction on a monthly basis, there is relatively little separating the other states and some of the weakness in NSW earlier in the year has dissipated.

NAB’s index is derived from personal transaction data from NAB platforms (around 2 million transactions per day) and includes all cashless retail spending by consumers using debit and credit cards (both in person and online), BPAY and Paypal. NAB’s Cashless Retail Index is reasonably assumed to be representative of aggregate non-cash retail sales in Australia given its large sample size. The average growth rate for NAB’s index is stronger than the official ABS measure of retail trade given that it does not capture cash transactions, which is why we use our mapping equations to forecast the official ABS measure of retail trade. RBA research suggests 18% of the value of retail trade occurred via cash in 2016. Over time, the growth rates of the two series are likely to come together.

For more information, download the report below:

• NAB Cashless Retail Sales Index: August 2018 (PDF, 113kb)