• The NAB Cashless Retail Sales Index gained 0.9% in July on a month-on-month basis, following a gain of 0.5% in June. Four of the six major categories saw an improvement (food, household goods, other retailing and cafes, restaurants and takeaway) while clothing and footwear saw lower (but still positive) growth and department stores turned negative.
• Our data mapping suggests that the official ABS measure of retail sales will rise only very slightly in July – up 0.1% on a month-on-month basis. The ABS printed 0.4% in June, in line with our forecast last month (although our June figure has since been revised slightly lower).
• The NAB Cashless Retail Sales Index was up a somewhat more encouraging 10.3% year-on-year in July, although this is potentially distorted by special factors from late-2017, including the new to Australia Black Friday
• Year-on-year growth is still positive for all six NAB Cashless Retail Index major industry groupings. Cafes, restaurants & takeaways remains the fastest growing category (16.1% y/y), strengthening after slightly weaker results in May and June. Food was the next strongest category at 11.2% y/y (also strengthening), followed by clothing and footwear (8.7%), other retailing (7.8%), department stores (7.2%) and household goods (6.8%). For more detail see Charts 3, 7 & 8.
• The convergence in retail spending patterns across Australia, which has been present for some months, continued in July. The ACT remains the strongest performer in the monthly data, but NSW, Vic, Qld, SA and WA all grew within a 0.2pp range in July on a monthly basis. This gap was 0.6pp as recently as February 2018.
• 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 (10.2% y/y versus 2.9% y/y in June).

NAB Chief Economist, Alan Oster commented:

The NAB Cashless Retail Sales Index strengthened in July, gaining 0.9% month-on-month following a rise of 0.5% in June. However, our mapping of the “official” ABS measure points to considerably weaker monthly growth of 0.1%. Our forecasts for the ABS measure tended to be stronger than the ABS prints in Q1, but were weaker in April and May, and very close in June.

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. The retail sector once again saw the weakest business conditions in the July Monthly Business Survey, although retail inflation picked up in July after a flat June.

Ultimately, while wage growth remains low, consumers will be fairly reluctant to spend. That said, our forecasts point to a pick-up in wage growth, in line with our expectation of moderately lower unemployment.

NAB Cashless Retail Sales Index month-on-month results were improved across four of the six sectors. Only one sector (department stores) saw negative growth in July. Over the year, growth remains positive across all six sectors. Overall, the NAB Cashless Retail Sales Index was up 10.3% y/y in July.

Cashless retail sales growth continues to converge across Australia. The ACT is the fastest growing jurisdiction on a monthly basis and is equal first with New South Wales on a year ended basis. Queensland remains the weakest performer on both a monthly and year ended basis.

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, please refer to the attached report:

• NAB Cashless Retail Sales Index: July 2018 (PDF, 112kb)