Growth, inflation and labour market all easing
The NAB Cashless Retail Sales Index gained 0.8% in October on a month-on-month basis, rebounding from a much weaker 0.2% in September.
The NAB Cashless Retail Sales Index was up in October, recording 0.8% month-on-month growth. However, our mapping of the “official” ABS measure points to continued weakness – we see the ABS measure gaining 0.2% in October, unchanged from the September print.
Results continue to be mixed, notwithstanding the characteristic volatility in the monthly data. Furthermore, the weakness we are seeing in cashless retail sales is reflected in the NAB Monthly Business Survey. Retail, which already reported the weakest business conditions across all industries – weakened further in October and remains the only industry to report deteriorating conditions.
Our main concern for the Australian economy remains weak consumption growth – which is likely to weigh on broader economic growth (accounting as it does for over half of all economic activity). With an already low savings rate, weak wage growth, high debt levels and some anxiety from slower growth in household wealth – we see a very cautious household sector over the next couple of years. For more information on our economic outlook, see The Forward View: Australia.
The previous divergence in conditions between states is showing signs of abating, although some states are clearly performing better than others. Our monthly data shows that New South Wales has gone from being the fastest growing state in March this year to the slowest in September and October.
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, download the report below:
© National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686.