Growth, inflation and labour market all easing
The NAB Cashless Retail Sales Index gained 0.2% in September on a month-on-month basis, its weakest result since April this year. Five out of six major categories grew in the month; while other retailing contracted.
NAB Chief Economist, Alan Oster commented:
The NAB Cashless Retail Sales Index weakened considerably in September, recording 0.2% month-on-month growth – its worst result since April 2018. However, our mapping of the “official” ABS measure points to an improvement – we see the ABS measure gaining 0.4% in September. The ABS recorded 0.3% growth in August on a month-on-month basis.
This is something of a mixed result, notwithstanding the characteristic volatility in the monthly data. While our forecast of the headline ABS figure is quite positive, our own measure is weaker and this is reflected in the NAB Monthly Business Survey. Survey measures show retail is weak and deteriorating, with retail conditions again the weakest of all sectors and the only sector with negative conditions. The September 2018 survey measure of retail prices also showed weakness, recording a fall in the month after having previously risen.
Indeed, weak consumer spending remains one of our main concerns for the Australian economy. We doubt much of the current momentum can be maintained in an environment of weak wages growth, high utility prices, falling house prices and concern about high debt levels. Furthermore, this time of year sees the release of the new iPhone, which has the potential to distort the data somewhat.
There is also a higher divergence in conditions between states than earlier this year. 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. Meanwhile Queensland continues to lag, recording the second slowest monthly growth.
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.
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