Growth, inflation and labour market all easing
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%).
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.
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