Retail Trade; New Home Sales
- Retail trade grew: Sales rose for the seventh straight month, up by 0.2 per cent in December after rising by 0.1 per cent in November. Annual spending growth eased from 5.0 per cent to 4.1 per cent, below the decade-average growth rate of 4.3 per cent.
- In real (inflation-adjusted) terms, retail trade rose by 1.5 per cent in the December quarter – the best quarterly result in almost two years.
- Strongest growth in the quarter was by “Electrical, Electronic & Gas Goods Retailing” (up 10.6 per cent – the strongest result in 14 years), followed by “Footwear and other personal accessory retailing” (up 5.9 per cent – the strongest result in two years), and “Liquor retailing” (up 2.6 per cent – the strongest result in three years)
- The biggest drop in sales in the quarter was recorded by “Newspaper & books” (down 7.1 per cent), followed by “Café and Restaurants” (down 2.8 per cent – the weakest result in four years).
- New home sales ease: New home sales fell by 1.9 per cent in December with detached houses down 0.2 per cent and multi-unit sales down by 9.2 per cent. For the December quarter sales lifted by 4.9 per cent compared with September quarter.
What does it all mean?
- Retail sales did lift for the seventh consecutive month. Maybe by not as much as analysts had expected but growth nonetheless. Aussie retailers have certainly faced their share of headwinds over the past year. And while its pretty clear that December was a soft month in terms of retail activity, the December quarter certainly looks a lot more buoyant. In real (inflation-adjusted) terms, retail trade rose by 1.5 per cent in the December quarter, marking the best quarterly result in almost two years.
- What the result highlight is a momentum shift. Activity levels were strong at the start of the quarter but seem to have pulled back over the Christmas spending period. Interestingly the soft result was also mirrored in the Commonwealth Bank Business Sales Index (which measures all the debit and credit transactions that are processed across CBA eftpos terminals).
- Sticking to the good news, the recent rate cut and the likelihood of further interest rate cuts should support activity over the medium term. The key shift in household psychology is that rate hikes are clearly off the agenda over the coming year – and that should support spending.
- In addition takeaway food has enjoyed a solid couple of quarters, with real December quarter sales up 5.5 per cent on a year ago – the strongest growth in over four years. Interestingly Café & restaurants struggled in the December quarter.
- Low and stable interest rates and the lift in wealth levels are supporting consumer spending. Add in the impact of the solid demand across the housing sector and it’s no surprise that Furniture, floor coverings, homeware, textile and electrical/electronic goods retailers are enjoying the benefits of a construction boom. In fact home improvement retail activity was the best performing category up 11.3 in the December quarter compared with a year ago – marking the strongest quarterly growth in over 10 years. Spending on electrical goods was up 10.6 per cent in the December quarter – marking the strongest quarterly growth in seven years. There has been a clear shift in consumer preferences. Housing-related spending is in and spending on self is out, with fewer people are updating their wardrobes, going out for dinner or buying cosmetics and other pharmacy goods.
- Interestingly Newspapers and book sales which lifted in the September quarter collapsed by over seven percent in the December quarter.
What do the figures show?
Retail trade – December month
- Retail trade rose for the seventh consecutive month up by 0.2 per cent in December after rising by 0.1 per cent in November.
- In trend terms, retail trade grew by 0.2 per cent in December.
- Non-food retailing rose by 0.1 per cent in December after falling by 0.3 per cent in November. Non-food retail spending is up 4.5 per cent on a year ago.
- Sales by chain-store retailers and other large retailers rose by 0.3 per cent in December to be up 4.0 per cent over the year.
- Sales rose in four of the eight states and territories, led by the Queensland (up 0.6 per cent), Western Australia (up 0.5 per cent), ACT (up 0.4 per cent), and NSW (up 0.2 per cent). Sales fell in Tasmania (down 1.3 1.1 per cent), South Australia (down 0.4 per cent) and the Northern Territory (down 0.1 per cent). Sales were flat in Victoria.
- Strongest growth in the month was by “Footwear and other personal accessory retailing” (up 3.5 per cent),“Clothing retailing” (up 2.3 per cent) and “Liquor retailing” (up 1.2 per cent).
- The biggest drop in sales in the month was recorded by “Hardware, building and garden supplies retailing”(down 3.4 per cent) “Newspaper and book retailing” (down 2.6 per cent) and “Department stores” (down 0.9 per cent).
Retail trade – December quarter
- In real (inflation-adjusted) terms, retail trade rose by 1.5 per cent in the December quarter – the best quarterly result in almost two years. In real terms sales were up 3.6 per cent on a year ago.
- Strongest growth in the quarter was by “Electrical, Electronic & Gas Goods Retailing” (up 10.6 per cent – the best result in seven years), followed by “Footwear and other personal accessory retailing” (up 5.9 per cent – a two year high), and “Liquor retailing” (up 2.6 per cent – the best result in three years)
- The biggest drop in sales in the quarter was recorded by “Newspaper & books” (down 7.1 per cent), followed by “Café and Restaurants” (down 2.8 per cent – the weakest result in four years).
New home sales
- New home sales rose by 1.9 per cent in December after a 2.2 per cent rise in November. Apartment sales fell by 9.2 per cent while detached house sales were flat.
- In December 2014 seasonally adjusted detached house sales increased by 2.8 per cent in Western Australia and by 2.6 per cent in Queensland. Detached house sales declined by 5.3 per cent in South Australia, 2.6 per cent in Victoria and 1.4 per cent in New South Wales.
- The Bureau of Statistics’ Retail trade publication contains the most current readings on the performance of consumer spending. The ABS surveys 500 ‘larger businesses’ and 2,750 ‘smaller businesses’. Retail trade covers spending at a broad range of retail outlets but excludes both petrol and motor vehicle sales. A weak retail trade result may point to a slowing economy as well weighing on the share prices of listed retail stocks. But retail trade estimates can’t be assessed in isolation – it is important to look at the influences determining future trends in consumer spending, such as income, employment and confidence levels.
- The Housing Industry Association releases data on the sales of new homes each month. The HIA collects the data each month from a sample of Australia’s largest 100 home builders. The survey covers around 14 per cent of the home building industry.
- Consumers are still spending albeit modestly. The boom in home construction has been the key driver of a lift in retail activity. More and more Aussies have been either building or buying homes. And if you are moving into new digs, most likely that means new carpets, curtains or even a lounge suite. And that reasoning seems to be playing out in terms of the official data.
- The Reserve Bank will be comforted by the lift in activity over the December quarter however the weakness in December Christmas sales is disappointing. The hope will be that the interest rate cut and shift in Reserve Bank rhetoric towards an easing bias boosts activity over coming months. Certainly household balancesheets are looking a lot healthier following the rate cut and ongoing slide in fuel prices.
What is the importance of the economic data?
- The Bureau of Statistics’ Retail trade publication contains the most current readings on the performance of consumer spending. The ABS surveys 500 ‘larger businesses’ and 2,750 ‘smaller businesses’. Retail trade covers spending at a broad range of retail outlets but excludes both petrol and motor vehicle sales. A weak retail trade result may point to a slowing economy as well weighing on the share prices of listed retail stocks. But retail trade estimates can’t be assessed in isolation – it is important to look at the influences determining future trends in consumer spending, such as income, employment and confidence levels.
- The Housing Industry Association releases data on the sales of new homes each month. The HIA collects the data each month from a sample of Australia’s largest 100 home builders. The survey covers around 14 per cent of the home building industry.
What are the implications for interest rates and investors?
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Consumers are still spending albeit modestly. The boom in home construction has been the key driver of a lift in retail activity. More and more Aussies have been either building or buying homes. And if you are moving into new digs, most likely that means new carpets, curtains or even a lounge suite. And that reasoning seems to be playing out in terms of the official data.
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The Reserve Bank will be comforted by the lift in activity over the December quarter however the weakness in December Christmas sales is disappointing. The hope will be that the interest rate cut and shift in Reserve Bank rhetoric towards an easing bias boosts activity over coming months. Certainly household balancesheets are looking a lot healthier following the rate cut and ongoing slide in fuel prices.