Retail trade grew: Sales rose for the tenth straight month, up by 0.3 per cent in March after rising by 0.7 per cent in February. Annual spending growth rose from 4.3 per cent to 4.5 per cent, mildly above the decade-average growth rate of 4.3 per cent.
In real (inflation-adjusted) terms, retail trade rose by 0.7 per cent in the March quarter to be up 2.8 per cent on a year ago.
Strongest growth in the month was by “Department stores”(up by 3.8 per cent), “Clothing retailing” (up 2.7 per cent. The biggest drop in sales in the month was recorded by “Electrical and electronic goods retailing” (down 3.7 per cent), and “Takeaway food services” (down 2.2 per cent).
Total apparent consumption of alcohol has fallen to a 50-year low. Apparent consumption of beer hit a 68-year low in 2013/14, wine consumption hit an 8-year low and consumption of spirits and “ready-to-drink” hit a 13-year low. Consumption of cider hit record highs, but from a low base.
New home sales lift: New home sales rose by 4.4 per cent in March to a four-year high.
What does it all mean?
Retail sales rose for the tenth 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. However the low interest rate environment is helping to offset some of those headwinds.
Overall the last two quarters of real (inflation adjusted) retail activity looks relatively healthy, with sales lifting by 0.7 per cent in the March quarter after a 1.2 per cent lift in the December quarter.
Interestingly the latest 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).
Looking forward, the recent rate cut and the likelihood of an extended period of low interest rates should support activity over the medium term. In addition, the ongoing lift in housing activity will support a further lift in spending. New home sales have risen to four-year highs, while earlier in the week building approvals hit record highs.
The drop in alcohol consumption to a 50-year low is a stunning result. While beer consumption has been consistently falling over the past six years, Aussie drinkers have not elected to substitute beer for other forms of alcohol. And while we have the data, we don’t have the reasons for the drop in alcohol consumption. It may reflect immigration, greater variety of leisure pursuits, increases in income and wealth (affordability of alcohol is at 20-year highs), diet and lifestyle. And there is the long-run influence of random breath-testing. Anecdotally Aussies continue to embrace quality over quantity and the downward trend in alcohol consumption is consistent with the “new conservatism” that has affected Aussie attitudes on financial matters.
Reduced alcohol consumption has implications for government coffers in terms of excise revenue. It has implications for liquor retailers, cafes, restaurants, clubs and the major supermarkets – Coles and Woolworths. While price is part of the buying consideration, it is the price/quality trade-off that matters most.
What do the figures show?
Retail trade – March month
Retail trade rose for the tenth consecutive month, up by 0.3 per cent in March after rising by 0.7 per cent in February.In trend terms, retail trade grew by 0.3 per cent in March.
Non-food retailing rose by 0.2 per cent in March after rising by 0.4 per cent in February. Non-food retail spending is up 4.8 per cent on a year ago.
Sales by chain-store retailers and other large retailers rose by 1.3 per cent in March to be up 6.4 per cent over the year.
Sales rose in five of the eight states and territories, led by the Queensland (up 0.7 per cent), Tasmania (up 0.5 per cent), South Australia (up 0.3 per cent), NSW (up 0.3 per cent) and Victoria (up 0.2 per cent). Sales fell in Northern Territory (down 0.8 per cent), ACT (down 0.5 per cent), and Western Australia (down 0.3 per cent)
Strongest growth in the month was by “Department stores” (up by 3.8 per cent), “Clothing retailing” (up 2.7 per cent),“Liquor retailing” (up 1.4 per cent), and “Footwear and other personal accessory retailing” (up 1.2 per cent).
The biggest drop in sales in the month was recorded by “Electrical and electronic goods retailing” (down 3.7 per cent), and “Takeaway food services” (down 2.2 per cent).
Retail trade – March quarter
In real (inflation-adjusted) terms, retail trade rose by 0.7 per cent in the March quarter after lifting by 1.4 per cent in the December quarter. In real terms sales were up 2.8 per cent on a year ago.
Retail prices lifted by 0.5 per cent in the March quarter after 0.1 lift in the December quarter.
Alcohol consumption
The apparent consumption of alcohol consumed in the form of beer fell from 4.04 litres of pure alcohol per person (aged 15 years or more) to 4.01 litres in 2013/14. It was the lowest result in 68 years. Consumption of full-strength beer fell from 3.32 litres to 3.28 litres; mid strength lifted from 0.58 litres to a record high of 0.61 litres; and low strength fell from 0.15 litres to a record low of 0.13 litres.
The consumption of alcohol in the form of wine slumped from 3.70 litres to an 8-year low of 3.64 litres in 2013/14. White wine consumption fell from 1.75 litres to 1.74 litres, red wine consumption fell from 1.39 litres to 1.35 litres and consumption of “other” wines (ports, sherry etc) fell from 0.56 litres to 0.55 litres.
Consumption of alcohol in the form of spirits fell from 1.95 litres to a 13-year low of 2013/14. Consumption of spirits fell from 1.29 litres to 1.23 litres. Meanwhile “ready to drink” eased from 0.65 litres to a record low of 0.61 litres.
Cider consumption continues to rise. The consumption of alcohol in the form of cider rose from 0.19 litres to 0.22 litres in 2013/14. Five years ago cider consumption was around half current levels.
Total apparent consumption of alcohol fell for the seventh straight year, down from 9.88 litres of pure alcohol per person to a 50-year low of 9.71 litres per person. As a standard drink consists of 12.5 mls of pure alcohol, this is equivalent to an average of 2.2 standard drinks per day per person aged 15 years and over.
New home sales
New home sales rose by 4.4 per cent in April after a flat result in March. Home sales are now holding at a four-year high. Apartment sales rose by 11.3 per cent while detached house sales rose by 2.6 per cent.
In the March quarter detached house sales increased in Victoria (+5.2 per cent) and Queensland (+4.3 per cent) and declined in WA (-6.4 per cent), NSW (-3.6 per cent) and SA (-1.4 per cent).
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.
The Australian Bureau of Statistics releases alcohol consumption data each year. The data is important for the hospitality sector.
What are the implications for interest rates and investors?
Consumers are still spending, albeit modestly. The boom in home construction will continue to be a key driver of a lift in retail activity over the coming year. More and more Aussies are 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 will continue to play out in the official data over the coming year.
The Reserve Bank will be comforted by the ongoing lift in activity however the focus shifts to consumer confidence levels and how they will hold up over the coming weeks – particularly in light of the upcoming Federal Budget. Last year’s Federal Budget resulted in a six month pullback in confidence. The hope will be that the latest interest rate cut offsets any negative sentiment over coming months. Certainly household balance sheets are looking a lot healthier following the rate cut.
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