• On a month-on-month, seasonally adjusted basis, growth for the NAB Online Retail Sales Index contracted again in May (-0.9%), following on from a significantly revised contraction in April (-1.3%).
• In year-on-year terms, the NAB Online Retail Sales Index continued to grow, albeit slowing in May (10.4% y/y).

• By category, results were somewhat mixed this month. Department stores continued to grow, and fashion returned to growth, while large sales category grocery and liquor, which recorded growth in April, contracted the most in May. In year-on-year terms, for grocery and liquor, growth however has remained double digit, albeit slowing. The largest sales category, homewares and appliances, recorded a smaller contraction than the overall index, but in year-on-year terms, is one of the slowest after strong growth over the prior two years.
• All states, except QLD, recorded a contraction in growth in month-on-month terms in May, with last month’s growth leader, SA, contracting more than the average. In year-on-year terms, ACT leads growth, with QLD leading the larger sales states.
• The contraction in growth deteriorated for regional areas in the month, while metro areas improved to record a smaller contraction. However, this headline result was influenced by a significant decline in SA regional sales in May, mostly reversing the gain for the same area in April. In year-on-year terms, growth in metro areas was slightly faster, with NSW and QLD contributing heavily to the result.
• The contraction in growth was larger in May for international retailers, with domestic improving slightly, albeit still contracting. Fashion, department stores, and personal and recreational goods contributed heavily to the monthly result for international. Over the year, domestic retailers continue to outpace international.
• NAB estimates that in the 12 months to May, Australians spent $55.96 billion on online retail, a level that is around 14.7% of the total retail trade estimate (April 2022, Series 8501, Australian Bureau of Statistics), and about 16.6% higher than the 12 months to May 2021.

NAB Chief Economist, Alan Oster commented:

In month-on-month terms, our NAB Online Retail Sales Index contracted again in May. Apart from the omicron induced spike in January, the monthly change has generally been negative since October. This coincided with the ending of lockdowns in the larger states, supporting the broader rebound in instore retail sales. In year-on-year terms our series remains positive, albeit slowing. This compares favourably with some published overseas series. The UK measure (BRC), for example, indicates UK online retail sales contracted again in year-on-year terms.

Our broader measure of retail trade, the NAB Cashless Retail Index, and our weekly monitor, suggests spending growth is beginning to soften. It is likely that inflationary pressures and concerns over the future direction of borrowing costs are beginning to weigh on the consumer.

For online retail, looking beyond the monthly volatility, what we observed in the past twelve months is the strong contribution to the index made by department stores, grocery and liquor, and takeaway food. These three categories make up about 40% of the index, but have contributed about 60% of the growth over the past year. In contrast, largest sales share category, homewares and appliances, has contributed much less to growth than its proportion of the index, while other categories like fashion have been on par.

This month in the heat map section, we take a look at the homewares and appliances category, and the change in growth compared to the pre-pandemic period.

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