• Growth contracted for the NAB Online Retail Sales Index in December (-4.5%), following on from a contraction in November (also -4.5%), on a month-on-month, seasonally adjusted basis.
• In year-on-year terms however, the NAB Online Retail Sales Index continued to grow, albeit slowing in December (8.2% y/y).
• A contraction in growth was recorded in month-on-month terms for all categories in December, except takeaway food, grocery and liquor and media categories. The contraction in large sales category, homewares and appliances, and department stores was significantly worse than the overall index change, whereas personal and recreational goods was in-line with the overall decline. In year-on-year terms, takeaway food, grocery and liquor, department stores, and fashion recorded considerable growth in December. Given their weights in the index, for 2021, there has been a clear contribution to growth from both department stores, and grocery and liquor retailing.
• All states except SA and NT recorded a contraction in month-on-month growth in December, with NSW, ACT and TAS fairing worse than the overall, and VIC slightly better (albeit still contracting). This is somewhat to be expected as the string of lockdowns ended in October, and in-store sales returned.
• The contraction in growth was higher in regional areas, relative to metro areas. The monthly result was heavily influenced by NSW, VIC, QLD, and SA, with a fall in regional areas much worse than metro. In contrast, the drop for TAS was more pronounced in metro areas. In year-on-year terms, growth in metro areas was considerably stronger relative to regional, except in TAS where metro contracted, and VIC where metro and regional growth rates were on par in December.
• Sales growth contraction was recorded for both domestic and international merchants this month, with international fairing slightly better in most categories, except media, and games & toys.
• NAB estimates that in the 12 months to December, Australians spent $52.93 billion on online retail, a level that is around 14.4% of the total retail trade estimate (November 2021, Series 8501, Australian Bureau of Statistics), and about 19.9% higher than the 12 months to December 2020.

NAB Chief Economist, Alan Oster commented:

In month-on-month terms, our NAB Online Retail Sales Index contracted again in December. It is worth noting that these recent monthly contractions are following on from the exceptionally strong ‘lockdown enhanced’ growth in the third quarter of 2021. Heightened seasonality is also playing a role in the monthly numbers. The seasonal factors for October and November were slightly larger this year, indicating the growing importance of two key months in the online retail calendar. Even with the monthly contractions in growth, comparing this period to the same period 2020, i.e. in year-on-year terms, the index continues to grow. Given that the base of November and December 2020 had already grown 55% and 40% year-on-year terms respectively, the share of online retail sales continued to increase.

The contraction in monthly online sales in December was driven by the ACT, NSW, and TAS. The former two had recorded strong online sales growth during the lockdown periods in Q3, and the current monthly result is likely to be partially reflective of an easing in restrictions during Q4. In year-on-year terms, while all states except TAS were positive, ACT still leads (15.5%), but this is some way from its recent peak (85.6% in September). From the recent results it’s clear that, absent any key disruptions, online will continue to moderate.

By category, supermarkets returned to moderate monthly growth after three prior months of contraction. The weak period for this category in month-on-month terms can be partly attributed to the elevated period in the third quarter of the year. Given their strong year-on-year performance, grocery and liquor, and department stores have contributed beyond their share of index sales to the growth in the overall online index.  In contrast, in 12-months-to terms, the biggest sales category, homewares and appliances, has contributed less than its share in the index. This is also noted in their respective share in the index compared to 12 months prior, with the former categories increasing their share of the online index, while the latter has decreased.

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