Growth, inflation and labour market all easing
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.
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.
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