• The NAB Cashless Retail Sales Index gained 0.5% in June on a month-on-month basis, following gain of 0.6% in May (revised from 0.8%). Results were stronger for only two of the six major categories: other retailing and cafes, restaurants and takeaways, although all but one category (household goods) recorded positive growth for the month. Overall, our indicator suggests that retail sales were much less buoyant in Q2 than Q1.
• Our data mapping suggests that the official ABS measure of retail sales will rise 0.4% in June, following a rise of 0.4% in May. The May ABS print was stronger than our then expectation for a flat result.
• The data remains a little more encouraging on a year ended basis, with the NAB Cashless Retail Sales Index up 9.9% in June, although this is potentially distorted by special factors from late-2017, including the new to Australia Black Friday.

• Year-on-year growth remained positive for all six NAB Cashless Retail Index major industry groupings. Cafes, restaurants & takeaways remains the fastest growing category (15.1% y/y), although the pace of growth has moderated a good deal since 2015. Food was the next strongest category at 9.8% y/y, followed by clothing and footwear (9.3%), department stores (9.3%) household goods (8.0%) and other retailing (7.8%). For more detail see Charts 3, 7 & 8.
• Retail spending patterns across Australia have seen some convergence over the past few months, with the difference between the fastest and slowest growing states around 60% of the long term average on a year ended basis. Interestingly, month-on-month data shows that the two strongest states in January and February (New South Wales and South Australia) are now the two weakest. It is however important to note that monthly data can be volatile.
• 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 2.5% y/y in May).

NAB Chief Economist, Alan Oster commented:

The NAB Cashless Retail Sales Index recorded monthly growth of 0.5% in June, slightly lower than the revised May result (0.6% m/m) but still better than the negative result from April (-0.1% m/m). Our mapping of the “official” ABS measure points to monthly growth of 0.4% in June.

The monthly data are volatile; however our latest Monthly Business Survey continues to underscore challenging conditions for the retail sector. Retail continues to have the lowest trend business conditions of any industry. Surveyed prices, costs and wages variables continue to suggest weak price pressures in the economy. Labour cost, purchase cost and final products prices growth all edged lower in June. Retail prices tracked sideways in the month, with no growth after increasing at a low rate recently.

NAB Cashless Retail Sales Index month-on-month results were mixed across the six sectors. Only cafes, restaurants and takeaways and other retailing strengthened in June, although only one sector (household goods) saw negative growth. Over the year, growth remains positive across all six sectors. Overall, the NAB Cashless Retail Sales Index was up 9.9% y/y in June.

Cashless retail sales growth has shown signs of convergence across Australia. Victoria is the fastest growing state on both a year ended and monthly basis, while Queensland is weakest on a year ended basis and South Australia is weakest on a monthly basis. On a monthly basis, the two strongest performers at the start of the year (New South Wales and South Australia) were the two weakest performers in June.

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: June 2018 (PDF, 112kb)