Growth, inflation and labour market all easing
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%).
“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:
© National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686.