• On a month-on-month, seasonally adjusted basis, growth for the NAB Online Retail Sales Index continued to contract in July (-1.4%), following on from a contraction in June (revised -1.4%, previously -1.5%).
• In year-on-year terms, the NAB Online Retail Sales Index recorded a large contraction in July (-7.3% y/y). It is worth noting that this is compared to a period of exceptionally strong growth in July 2021.
• By category, department stores defied the month-on-month headline contraction, with growth also recorded for media, and games and toys. Personal and recreational goods, which was the only category to record monthly growth in June, contracted the most in July. The largest sales category, homewares and appliances, was in line with the overall contraction in month-on-month terms. In year-on-year terms, takeaway food, and media, continue to grow.
• The state result was also mixed in the month, with moderate growth for QLD, ACT and WA outweighed by a contraction in NSW and VIC. In year-on-year terms, the larger contraction in NSW and VIC outweighed growth in the other large sales states. Again, some perspective is warranted here, with the comparison made to a period in 2021 of exceptionally high growth.
• The contraction in growth for metro areas contributed heavily to the overall result, while regional areas improved, to record slight growth. NSW played a significant part in this result as well, with metro areas contracting well beyond the overall index, while regional areas for the state recorded growth. In year-on-year terms, growth in metro areas contracted, while regional areas remained positive, albeit slowing.
• The contraction in monthly growth was attributed to domestic retailers, with international recording slight growth. This was particularly the case for personal and rec, and media. However, growth for department stores, which recorded growth in the month, came from domestic retailers, with international contracting. Over the year, domestic retailers recorded a larger contraction, again, partly reflecting the considerable growth a year prior.
• NAB estimates that in the 12 months to July, Australians spent $56.01 billion on online retail, a level that is around 14.5% of the total retail trade estimate (June 2022, Series 8501, Australian Bureau of Statistics), and about 13.6% higher than the 12 months to July 2021.

NAB Chief Economist, Alan Oster commented:

In month-on-month terms, our NAB Online Retail Sales Index contracted again in July. Apart from the Omicron induced spike in January, the monthly change has generally been negative since October. In year-on-year terms, our series again recorded a contraction, much larger than that recorded in June. It is worth keeping this in context. Most states during the September quarter 2021 experienced some form of lockdown. Online sales growth in July 2021 remained elevated, boosted particularly by NSW. To put this in further perspective, if we compare the current headline total, to that of the same month pre-covid (i.e. July 2022 vs July 2019), total online spend is up about 85%. This compares favourably to broader retail sales, indicating that while there has been weakness in year-on-year terms, the broader long-term strength of online retail remains intact. Indeed, in twelve-months-to terms, growth remains positive (13.6%). Much of this came from growth during the lockdown period in the third, and early fourth, quarters of 2021. In the near term though, using our other measures of consumer spend as a guide, we continue to see moderation.

Three clear standout categories over the past year in terms of contribution to growth (through the year terms) have been department stores, grocery and liquor, and takeaway food. With average higher growth over the period, each of these has gained share in the index. In contrast, homewares and appliances, which is still the largest in share, and personal and recreational goods, contributed less to growth than their share in the index. It remains to be seen whether some of the discretionary elements of home delivery remain in a more constrained budgetary environment.

This month in the heat map section, we zoom in on the latest year-on-year results in New South Wales, for overall NORSI growth, to help visualise the result from the metro and regional areas, given the latest result.

Get all the insights in the NAB Online Retail Sales Index (July 2022)