Retail trade; Weekly petrol prices Job Ads; Inflation gauge
- Retail trade lifts: Retail trade rose by 0.2 per cent in September after a 0.4 per cent increase in August. Economists had tipped a 0.4 per cent lift in sales.
- In real (inflation-adjusted) terms, retail trade fell by 0.1 per cent (forecast: +0.3 per cent) in the September quarter after a 0.1 per cent lift in the June quarter. Over the year, real retail trade declined by 0.2 per cent – the biggest fall in 28 years.
- Retail prices: Prices across retailers rose by 0.6 per cent in the September quarter after a 0.5 per cent increase in the June quarter. Annual growth of retail prices lifted from 2.4 per cent to a decade high of 2.7 per cent.
- Petrol prices: According to the Australian Institute of Petroleum, the national average price of unleaded petrol fell by 1.9 cents last week to 152.2 cents a litre. Over the week, the Singapore benchmark gasoline price – the largest component of fuel prices paid by motorists – fell by A$4.95 (-4.7 per cent) to A$100.65 a barrel or 63.30 cents a litre – the lowest level in five months.
- Job advertisements: ANZ job advertisements fell by 1.0 per cent in October after rising by 0.3 per cent in September. Ads were down by 11.4 per cent over the year to 155,972.
- Inflation: The Melbourne Institute monthly headline inflation gauge rose by just 0.1 per cent in October. The gauge’s annual growth rate was unchanged at 1.5 per cent. The trimmed mean gauge also lifted by 0.1 per cent, but the annual growth rate decelerated from 1.6 per cent in September to 1.6 per cent in October.
Retail trade data is important for consumer-focussed companies. The job advertisements data is a leading indicator of the job market and therefore important for consumer-focussed stocks and companies such as SEEK. Movements in the petrol price can affect consumer spending, and in turn, prospects for retailers. The inflation gauge estimates month-to-month price movements for a wide-ranging basket of goods and services.
What does it all mean?
- Aussie shoppers would’ve noticed that prices for retail goods and services have lifted this year. In fact, annual growth in retail prices have increased by 2.7 per cent in September – the most in a decade. In the September quarter, prices charged by cafes, restaurants and takeaway food services (up by 0.8 per cent) lifted by the most in seven years. So it makes some sense that Aussies restrained their spending on this segment. In trend terms, the annual growth in spending at cafes, restaurants and takeaway food services decelerated to 1.6 per cent in September – the weakest growth rate in 7½ years.
- And prices for food (up by 0.7 per cent to 4.5 per cent over the year to September), and clothing, footwear and personal accessories (up by 1.1 per cent) also lifted in the September quarter due to the drought and the weaker value of the Aussie dollar against the greenback. That said, spending on shoes still increased by 2.6 per cent during the quarter.
- Given today’s weaker-than-expected retail trade data, it would be easy to jump to conclusions that lower and middle income tax offsets aren’t encouraging Aussies to part with their hard earn coin. But spending on electrical goods rose by 1.9 per cent in the September quarter, suggesting that shoppers are still heading to JB Hi-Fi to upgrade their TVs, computer equipment and headphones.
- Prices at the bowser are set to fall across most of the country. The retail unleaded petrol price discounting cycle is underway on Australia’s East Coast. And international benchmark gasoline prices have declined for three successive weeks. In Aussie dollar terms, the Singapore gasoline price fell by $4.95 or 4.7 per cent to a 5-month low of 63.30 cents a litre last week. A stronger Aussie dollar against the greenback (up 1.3 per cent last week) is helping to reduce the cost of imported refined petroleum product – the largest component of fuel prices paid by motorists.
What do the figures show?
Retail trade – September
- Retail trade rose by 0.2 per cent in September after a 0.4 per cent increase in August. Annual growth rose fell from 2.55 per cent to 2.51 per cent. In trend terms, the annual growth rate fell to 21-month lows of 2.35 per cent.
- Non-food retailing rose by 0.2 per cent in September and annual growth lifted from 1.9 per cent to 2.1 per cent.
- Sales by chain-store retailers and other large retailers rose by 0.2 per cent in September after a 0.6 per cent increase in August to stand 4.7 per cent higher over the year.
- Spending rose most in September in “other” retailing (up by 0.8 per cent), cafes, restaurants and takeaway services (up by 0.6 per cent) and food retailing (up by 0.1 per cent).
- Spending fell the most for clothing, footwear and personal accessory retailing (down by 0.5 per cent) and department stores (down by 0.2 per cent). Household goods spending was broadly unchanged.
- Across states/territories: Tasmania (up by 1.0 per cent); Western Australia (up by 0.7 per cent); New South Wales (up by 0.3 per cent); South Australia (up by 0.2 per cent); ACT and Northern Territory (both up by 0.1 per cent); Victoria (flat); and Queensland (down by 0.1 per cent).
Retail trade – September quarter
- In real (inflation-adjusted) terms, retail trade fell by 0.1 per cent in the September quarter after a 0.1 per cent lift in the June quarter. Real annual spending fell by 0.2 per cent – the biggest decline since June quarter 1991 (28 years)
- Spending rose for 10 of the 16 major spending categories.
- Spending rose the most in the September quarter for Footwear and other personal accessory retailing (up by 2.6 per cent); Electrical and electronic goods retailing (up by 1.9 per cent); Sports, toys, entertainment (up by 1.5 per cent); and Supermarket and grocery stores (up by 1.0 per cent).
- Biggest falls in spending were at Butchers, fruit, fish, bakers (down by 2.3 per cent); Newspaper and book retailing (down by 1.3 per cent); and Cafes, restaurants and catering services (down by 0.6 per cent).
- Prices across retailers rose by 0.6 per cent in the September quarter after a 0.5 per cent increase in the June quarter. Annual growth of retail prices lifted from 2.4 per cent to a decade high of 2.7 per cent.
- Prices rose most in the September quarter in Clothing, footwear and personal accessory retailing (up 1.1 per cent); Cafes, restaurants and takeaway food services (up by 0.8 per cent); and Food retailing (up by 0.7 per cent).
- In the September quarter there was still deflation in Household goods retailing (down by 0.1 per cent).
Job advertisements – October
- ANZ job advertisements fell by 1.0 per cent in October after rising by 0.3 per cent in September. Ads were down by 11.4 per cent over the year to 155,972.
Inflation – October
- The Melbourne Institute monthly headline inflation gauge rose by just 0.1 per cent in October. The annual growth rate was unchanged at 1.5 per cent. The smoothed 12-month annual average of the gauge is at 1.69 per cent in October – the slowest growth rate in 2½ years.
- The trimmed mean gauge also lifted by just 0.1 per cent in October. And the annual growth rate decelerated from 1.6 per cent in September to 1.5 per cent in October – below the Reserve Bank’s 2-3 per cent underlying inflation target.
Petrol prices
- According to the Australian Institute of Petroleum, the national average price of unleaded petrol fell by 1.9 cents in the past week to 152.2 cents a litre. The metropolitan price fell by 2.8 cents to 154.1 cents a litre, but the regional price rose by 0.1 cent to 148.3 cents a litre.
- Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 4.6 cents to 153.9c/l), Melbourne (down by 6.5 cents to 156.1 c/l), Brisbane (down by 7.9 cents to 156.2 c/l), Adelaide (up by 21.6 cents to 161.6 c/l), Perth (down by 1.5 cents to 143.1 c/l), Darwin (down by 1.9 cents to 145.2 c/l), Canberra (down by 0.4 cents to 148.0 c/l) and Hobart (down by 0.1 cent to 156.0 c/l).
- The smoothed gross retail margin for unleaded petrol rose from 12.96 cents a litre last week to a 3½ month high of 14.1 cents a litre (24-month average: 13.1 cents a litre).
- The national average diesel petrol price fell by 0.2 cents to 149.7 cents a litre over the week. The metropolitan price fell by 0.1 cent to 148.5 cents a litre and the regional price also fell by 0.1 cent to 150.8 cents a litre.
- Today, the national average wholesale (terminal gate) unleaded petrol price stands at 130.8 cents a litre, down by 1.8 cents over the week. The terminal gate diesel price stands at 137.1 cents a litre, up by 0.2 cents over the past week.
- MotorMouth records the following average retail prices for unleaded fuel in capital cities today: Sydney 146.0c; Melbourne 150.2c; Brisbane 148.7c; Adelaide 154.2c; Perth 132.7c; Canberra 147.7c; Darwin 144.9c; Hobart 155.9c.
- The key Singapore gasoline price fell by US$2.50 last week (-3.5 per cent) to US$69.50 a barrel. In Australian dollar terms, the Singapore gasoline price fell by $4.95 (-4.7 per cent) to $100.65 a barrel or 63.30 cents a litre – the lowest level in five months.
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 monthly Job Advertisements release is a leading employment indicator. Employers only seek additional staff if business activity is strong, and more importantly, if they expect that conditions will remain favourable in coming months. It takes around 5-6 months for the new staff to be added to the payrolls. But a fall in job advertisements would have a more immediate impact on monthly employment estimates.
- Weekly figures on petrol prices are compiled by ORIMA Research on behalf of the Australian Institute of Petroleum (AIP). National average retail prices are calculated as the weighted average of each State/Territory metropolitan and non-metropolitan retail petrol prices, with the weights based on the number of registered petrol vehicles in each of these regions. AIP data for retail petrol prices is based on available market data supplied by MotorMouth.
- Melbourne Institute have developed a monthly inflation indicator to give markets and policy makers a monthly update on inflation trends. Based on the ABS methodology for calculating the quarterly consumer price index, the Melbourne Institute Monthly Inflation Gauge estimates month-to-month price movements for a wide-ranging basket of goods and services across the main capital cities of Australia. This report is produced monthly and is released with a lag of one month.
What are the implications for interest rates and investors?
- Today’s September retail spending data was decidedly mixed. While real annual spending growth was the weakest in 28 years, Aussies are still making purchases at chains and large retailers (trend annual growth rate of 4.7 per cent to September).
- That said, cost-conscious Aussies remain cautious. Overall inflationary pressures may be benign, but it certainly doesn’t feel like it to consumers. Food prices are lifting due to the drought. And retailers – under enormous pressure from global competitors, e-commerce/online platforms and expectations by shoppers for never-ending discounts – have begun to lift prices to defend their margins. Consumers have reacted by reducing their spending at cafes, restaurants and on takeaway food outlets. But spending on household goods appear to have bottomed due to cheaper prices, increased offerings (i.e. Kmart) and the revival of the property market.
- There is some relief for Aussie households, however, with unleaded petrol prices easing across the country. Motorists in the more competitive East Coast fuel markets should fill up before the weekend as the latest retail discounting cycle pushes prices back towards the wholesale price of around $1.30 a litre. Retailers made sizeable margins last week of around 14 cents a litre – the most in over three months.
- At this stage, Commonwealth Bank Group economists expect another interest rate cut in February 2020.