October 18, 2017

NAB Monthly Cashless Retail Sales Index: September 2017

NAB’s proprietary indicator of Australian retail sales, the NAB Cashless Retail Sales Index, reveals a rebound in spending in the month of September.


  • Despite the pickup in the month of September however, there has been a clear slowing over the past three months which has seen the yearly growth rate drop to 5.5% in September, from 6.4% in August and 8.0% in July (in seasonally adjusted terms).
  • The pickup in NAB’s Cashless Retail Sales Index in September follows a contraction in August (although the magnitude of the decline is not as large following revisions). Based on movements in NAB’s data and our data mapping techniques, ABS retail trade is expected to rise by 0.6% mom in September which would reverse the published 0.6% decline in August. (See table below, Chart 2 and appendix.)
  • While most categories improved in the month (albeit often to still negative reads), the largest increase in the month was in the volatile department store category. Meanwhile, yearly growth in the NAB Cashless Retail Index is down across most categories in the past four/five months. It is particularly feeble for clothing & footwear (1.1% yoy seasonally adjusted) and household goods (1.6% yoy). Spending at cafes, restaurants & takeaways has also eased back sharply but remains strong (8.1% yoy).
  • The slowing in recent months has also evident across all states and territories, although yearly spending growth strongest in the ACT (7.5% yoy) and NSW (6.5%). Spending growth is also reasonably strong in South Australia (5.5% yoy), Queensland (5.3% yoy and Victoria (5.0%), but very weak in WA (1.3% yoy) (Chart 4).
  • 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. Cashless sales to consumers have been growing much more rapidly than the ABS measure of retail sales in recent years (6.4% yoy in August versus 2.1% yoy), although the gap in growth rates has narrowed (Chart 1). Further convergence is likely as the penetration of online and contactless payment systems reach a limit (reflecting minimum spend requirements for cashless transactions and the existence of a proportion of merchants who deal only in cash).

NAB Chief Economist, Alan Oster commented:

“Retail spending appears to have bounced back the month of September, after poor outcomes in both July and August. NAB’s Cashless Retail Sales Index shows a rise of 0.2% mom, which suggests an increase in the “official” ABS measure of retail trade of 0.6% in the month.

“This is an encouraging signal, although we note that spending has continued to slow in yearly terms, suggesting we will need to see further improvement in coming months before declaring that severe pressure on retailers has come to a halt. Indeed NAB’s Business Monthly Business Survey continued to report negative business conditions for retailers, the weakest of all industry groups.”

“The surge in employment growth since March may support retail spending in coming months. Other factors meanwhile may continue to weigh. These include low wages growth, with recent analysis by NAB in its State Economic Handbooks showing that consumer spending has been outpacing labour income growth in nearly all states and territories. This is consistent with the decline in the national savings rate – it is not clear whether this has been voluntary or involuntary. High energy costs and elevated levels of household debt are also legitimate concerns of households at present.

“Weakness in retail sales in nominal (value) terms may also reflect price deflation, or disinflation, for some retail goods, with retailers struggling to pass on cost increases amidst relatively weak consumer demand and cost increases. CPI data for Q3 released in October will give us a better feel for this.

“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 or contact: