Record retail spending in WA and the Top End – Biggest lift in business credit growth in 13 years

Retail trade; Private sector credit

• Retail trade rose by 1.8 per cent in January after falling by 4.4 per cent in December. Retail trade was up by 6.4 per cent on a year ago to $32.5 billion, the second highest level on record. Spending in Western Australia and the Northern Territory both hit all-time highs in January (records since April 1982).
• Private sector credit (effectively outstanding loans) rose by 0.6 per cent in January to be up 7.6 per cent on a year ago – the strongest annual growth rate in 13 years.
• Housing credit lifted by 0.7 per cent in January to be up 7.7 per cent when compared to a year ago – the strongest annual pace in 11 years (since August 2010). Business credit lifted 0.6 per cent in January to be up 9.0 per cent over the year – the strongest pace in 13 years (since November 2008).

What does it all mean?

• Aussie retail spending has been choppy in recent months due to the Delta lockdowns, the Omicron virus outbreak and the ‘Black Friday’ sales. The Omicron virus variant surge in December and January caused widespread disruptions for retailers, with elevated staff absenteeism and supply chain snarls affecting trade.
• Retail sales fell by 4.4 per cent in December, with a partial 1.8 per cent recovery in January. Heightened virus risks in early January saw some consumer shun high-traffic shopping malls amid a ‘voluntary or shadow lockdown.’ Lockdown beneficiaries, such as food retailing (up 2.2 per cent) and household goods (up 0.6 per cent) saw a pick-up in spending in January. But face-to-face services, like cafes, restaurants and takeaways suffered with spending on this category down 0.8 per cent.
• That said, January spending was particularly strong in Western Australia (up 4.7 per cent to a record high $3.7 billion), South Australia (up 3.1 per cent), Victoria (up 2.5 per cent) and the Northern Territory (up 1.3 per cent to a record high $310.5 million). And while the Omicron wave may have stifled spending in NSW (up 1.0 per cent) and Queensland (up 0.4 per cent), trade at department stores was still brisk (up 4.9 per cent).
• Of course, stronger growth in retail sales is expected in February after the peak in the Omicron wave, with governments easing restrictions and households more comfortable to head to the shops.
• While real (inflation-adjusted) wage growth is going backwards due to elevated price pressures, household spending is being supported by excess savings amassed during the pandemic. According to APRA, deposits from households increased by $6.5 billion or 0.5 per cent in January to a record $1,238.1 billion, up by 11.3 per cent on a year ago.
• The latest Reserve Bank (RBA) financial aggregates were issued today. Total private sector credit (effectively outstanding loans) lifted by 0.6 per cent in January to be up 7.6 per cent on a year ago – the strongest annual growth rate in 13 years (since November 2008) – driven by a lift in housing credit growth.
• In fact, housing credit remained firm in January. Recent strength in home lending demand is supportive of the pipeline of credit growth as buyers look to lock-in lower mortgage rates in anticipation of higher borrowing costs later this year. In fact, housing credit surged by a solid 7.7 per cent over the year to January (the strongest annual pace in 11 years), with owner-occupier housing credit 9.8 per cent higher – recording the strongest annual growth rate in 13½ years. Investor housing credit is up 3.7 per cent on a year ago, the strongest annual rate in 4 years.
• Policymakers are keeping a close eye on elevated household mortgage debt levels and investor lending demand after a big lift in home prices. Already, expectations are growing that a further tightening of macro-prudential policy will be required later this year. That said, slowing home prices in Sydney and Melbourne, rising fixed mortgage rates, affordability constraints and announced changes by banking regulator APRA on mortgage serviceability guidelines, are expected to slow property market activity later in 2022.
• Business credit lifted by 0.6 per cent in January to be 9.0 per cent higher over the year, the strongest pace in 13 years (since December 2008). The strength of business credit growth likely reflects increased borrowing for investment purposes in the final quarter of 2021. In fact, the latest estimate of capital spending intentions signalled a strong lift in business investment – potentially the highest in a decade – in the current financial year.

What do you need to know?

Retail trade – January

• Retail trade rose by 1.8 per cent in January after falling 4.4 per cent in December. Retail trade was up by 6.4 per cent on a year ago to $32.5 billion, the second highest level on record.
• By category, retail spending rose by the most for department stores (up 4.9 per cent), followed by “other” retailing (up 4.5 per cent), food retailing (up 2.2 per cent) and household goods retailing (up 0.6 per cent). But spending fell in clothing, footwear and personal accessory retailing (down 1.0 per cent) and at cafes, restaurants, and takeaway food services (down 0.8 per cent).
• By state and territory, spending lifted by the most in Western Australia (up 4.7 per cent), followed by South Australia (up 3.1 per cent), Victoria (up 2.5 per cent), Northern Territory (up 1.3 per cent), NSW (up 1.0 per cent), Tasmania (up 0.7 per cent), and the ACT and Queensland (both up 0.4 per cent).

Private sector credit – January

• Private sector credit (effectively outstanding loans) rose by 0.6 per cent in January to be up 7.6 per cent on a year ago – the strongest annual growth rate in 13 years (since November 2008).
• Housing credit lifted by 0.7 per cent in January to be up 7.7 per cent when compared to a year ago – the strongest annual pace in 11 years (since August 2010).
• Owner-occupier housing credit jumped by 0.8 per cent in January to be up 9.8 per cent on a year ago – the strongest annual growth rate in 13½ years (since July 2008). And investor housing credit rose by 0.4 per cent to be 3.7 per cent higher on a year ago – the strongest annual rate in 4 years (since October 2017).
• Elsewhere, personal credit dipped 0.6 per cent in January, falling by 3.8 cent over the year.
• Business credit lifted 0.6 per cent in January to be up 9.0 per cent over the year – the strongest pace in 13 years (since November 2008).
• The M3 money aggregate lifted by 0.1 per cent in the month to be up 8.7 per cent from a year ago. Broad Money also rose by 0.1 per cent to be up 8.9 per cent from a year ago.
• The APRA authorised deposit-taking institutional statistics reveal that loans to households via credit cards fell by $1.2 billion or 4.2 per cent in January. And credit card lending is down 6.4 per cent on the year.
• According to APRA, deposits from households increased by $6.5 billion or 0.5 per cent in January to a record $1,238.1 billion, up by 11.3 per cent on a year ago.