Growth, inflation and labour market all easing
After a weak mid-year period, online retail sales continued to grow in September, albeit at a more moderate pace than the significant growth rate recorded in August.
NAB Chief Economist, Alan Oster commented:
Our NAB Online Retail Sales Index data indicates that, after a considerably weak mid-year period, online retail sales continued to grow in September, albeit at a more moderate pace than the significant growth rate recorded in August. Online retail sales tend to be more volatile than broader retail, experiencing far greater monthly fluctuations, but the past six months have been considerably more so. Looking through the month-to-month volatility, sales growth in year-on-year terms returned to double digits, and 12-months-to September growth remains strong.
In month-on-month terms, there was further improvement in sales growth for the largest sales category, homewares and appliances, which grew broadly in line with the headline result. Growth in this category was driven by domestic merchants, with international sales growth for this category slightly negative in the month. This category was significantly impacted by the mid-year sales weakness, so much so, that its share of the online index has dropped from around 28% a year ago to about 26% now. The smaller sales share category, games and toys, grew fastest in the month, with high sales growth of international merchants contributing strongly to overall category growth. The smallest sales category, takeaway food, has been the most volatile in terms of sales growth, possibly due to structural changes by way of high profile exits and consolidation. Through this volatility, this category’s sales have doubled when compared to the monthly sales of September 2018, and is almost 50% larger in the 12-months-to September 2019.
Of the large sales states, Victoria leads in year-on-year growth, with NT and Tasmania leading the smaller sales regions. Online sales growth in Victoria on average has been higher than NSW over the past couple of years. Consequently, the gap in spend share between the two is narrowing.
Representing about two-thirds of all online sales, metropolitan areas recorded the stronger growth in September, relative to regional areas. The large sales states of NSW, Victoria and Queensland were the key drivers of the strong metropolitan area result, with regional area sales growth contracting after strong gains in August for these states. Sales growth was stronger in regional areas than metropolitan in WA, SA (albeit slightly), and Tasmania. NSW recorded the strongest contraction in regional online retail sales in September (-1.8%). This more likely reflects a retracing of the exceptionally strong result in August (+10.8% mom, s.a.) rather than directly drought related effects.
By merchant location, international retailers (+3.2%) grew strongly in the month. Domestic (+1.4%) retailers grew at a relatively slower rate after the strong August (+5.7%) rebound. The result was due to a particularly strong rebound in the key sales categories of homewares and appliances, and media.
It is worth noting here that our definition of a domestic online retailer can include those merchants whose parent organisation might be overseas with an Australian subsidiary. Solely using GST as a key defining characteristic of domestic and international is no longer appropriate given changes made in July 2018.
For further details, please see the NAB Online Retail Sales Index September 2019
© National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686.