• The NAB Cashless Retail Sales Index gained 0.8% in May on a month-on-month basis, following a flat read in April (revised from -0.6%). Results were stronger for four of the six major categories: food, household goods, clothing & footwear and department stores. Meanwhile other retailing turned negative and while cafes, restaurants & takeaways rose in the month, growth moderated. Our data mapping suggests that the official ABS measure of retail sales will be flat in May following the stronger-than-expected 0.4% in April. Our April estimate was revised this month, although remains well below the ABS April print.
• The data remains more encouraging on a year ended basis, with the NAB Cashless Retail Sales Index up 10.3% in May, although this is potentially distorted by special factors from late-2017 (for example Black Friday sales and Apple’s Iphone x).
• Year-on-year growth remained positive for all six NAB Cashless Retail Index major industry groupings. Cafes, restaurants & takeaways remains the fastest growing category (14.9% y/y), although the pace of growth has moderated a little recently. Department stores was the next strongest category at 10.7% y/y, followed by household goods (10.1%), food (9.3%) other retailing (9.3%) and clothing & footwear (7.7%). For more detail see Charts 3, 7 & 8.
• Retail spending patterns continue to converge across Australia, with an only 2.0 ppt difference between the fastest growing state (the Australian Capital Territory) and the weakest (Western Australia) – see chart 4. The average difference between the highest and lowest state growth rates since 2015 has been around 4.8 ppts.
• 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 2.6% y/y in April).

NAB Chief Economist, Alan Oster commented:

“The NAB Cashless Retail Sales Index growth improved in May (0.8% m/m) after the weak outcome last month. However, our mapping of the “official” ABS measure presents a less positive picture, suggesting a flat result for retail sales in May (0.0% m/m).

While the monthly data are volatile, our latest Monthly Business Survey also showed a pull-back in overall business conditions in May after reaching historical highs in April. Retail remains the weakest sector in the survey, although it is positive in trend terms, if only just.

The National Accounts also reported soft consumption growth in Q1, reinforcing our caution about the outlook for the consumer. This reflects several headwinds including rising energy costs, low wages growth, stalling growth in housing wealth (with house prices falling in some markets) and high debt levels.

Month-on-month results were mixed across the six sectors. Food, household goods, clothing & footwear and department stores strengthened, while other retailing turned negative and growth moderated for cafes, restaurants & takeaways. Over the year, growth remains positive across all six sectors. Overall, the NAB Cashless Retail Sales Index was up 10.3% y/y in May.

Cashless retail sales growth has shown signs of convergence across Australia. While the Australian Capital Territory is the strongest performer (+11.0% y/y), the weakest, Western Australia, is only 2.0 percentage points behind (+9.0% y/y). Cashless retail sales in Western Australia are now growing roughly twice as fast the same time in 2017 on a year on year 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: May 2018 (PDF, 114KB)