• The NAB Cashless Retail Sales Index grew 1.2% on a month on month basis in March – slower than January or February. Our data mapping gives a fairly weak forecast of +0.2% m/m for the official ABS measure of retail sales in March. Our February forecast of 0.7% was close to the ABS print of 0.6%, although January saw a weaker ABS read vis-à-vis our measure (0.2% m/m against 0.8% m/m). Generally most sectors in March were weak – especially cafes restaurants and takeaway and household goods. Department stores were, however, reasonably strong.
• The data is more encouraging on a year on year basis, with the NAB Cashless Retail Sales Index up 11.5% in March, although this was distorted by special factors (iPhone X and Black Friday) in late 2017.
• Year on year growth was positive for all six NAB Cashless Retail Index major industry groupings, although the growth rate slowed slightly in two (clothing and footwear and department stores). Spending at cafes, restaurants & takeaways continues to be the fastest growing category (18.9% y/y). Other retailing was the next strongest at 12.8% y/y, with household goods also strong at 12.7% y/y. Department stores grew 11.5% y/y, down slightly from 11.6% last month while food sales growth stood at 9.9%. Clothing & footwear sales growth has lagged recently, but still managed 6.6% y/y growth in March.  For more detail see Charts 3, 7 & 8.
• Annual spending growth strengthened across Australia on a seasonally adjusted basis, although the monthly trend data was a little weaker. The Australian Capital Territory lost the lead it established last month, growing 12.1% (y/y, s.a.) in March, surpassed by South Australia on 12.8% and New South Wales on 12.3%. Victoria also enjoyed double digit growth (11.4%) while Queensland grew 9.4% and Western Australia 9.2%.
• 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 (10.6% y/y versus 3.0% y/y in February).

NAB Chief Economist, Alan Oster commented:

“Annual growth in cashless sales improved again this month, with NAB’s Cashless Retail Index seeing growth of 11.5% y/y in March, up from 10.6% in February. This is the fastest rate since late 2015. Monthly data, which it must be said is much more volatile, slowed to 1.2% m/m, down from 1.4% in February.

“Our mapping of the “official” ABS measure also implies a relatively flat outcome in March. That is mapping equations suggest monthly growth of 0.2% March, compared to our forecast last month of 0.7% m/m. While the latter was close to the February ABS print of 0.6% y/y, it is important note the divergence in the two series at the start of the year. In March most sectors were weak – especially cafes restaurants and takeaway and household goods. Department stores were, however, reasonably strong.

“Turning to our spending data, annual growth has been higher across Australia, with South Australia claiming top spot, followed by New South Wales, the Australian Capital Territory and Victoria. Western Australia saw the slowest growth in March, followed closely by Queensland.

“The retail sector is still underperforming compared with other industries, although the March NAB Monthly Business Survey saw the sector record its best business conditions result in 9 months on a trend basis. Retail confidence was down slightly on a trend basis in March but was still at +10. Consumers remain cautious in the face of higher electricity prices, low wages growth, stalling house price wealth and high debt levels.

“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: March 2018 (PDF, 112kb)