Australia: Retail sales came below market expectations - ANZ

Felicity Emmett, Head of Australian Economics at ANZ, notes that Australia’s retail sales growth continued the weak trend in May, rising just 0.2% m/m after a downwardly-revised 0.1% rise in April.

Key Quotes

“Warm weather continued to impact clothing sales, while higher petrol prices may also have had an impact. The weak result comes despite buoyant consumer confidence in May. While confidence remains at a high level, we will be watching developments over coming weeks to gauge any impact from the current political uncertainty.

Retail sales rose just 0.2% m/m in May, once again below market expectations. On an annual basis, growth in retail sales slipped to 3.4% y/y, down from 4.1% at the end of last year.

Clothing sales fell again, down 1.4% in May after a downwardly-revised fall of 1.5% in April. This is consistent with anecdotes of poor winter clothing sales as a result of the warmest autumn on record. A return to cooler weather in June should see clothing sales improve. Higher petrol prices may also have impacted sales. Pump prices were up 2.4% in May and are 7.9% higher than three months ago.

The state breakdown shows that NSW and Victoria continue to be key drivers of strength in the economy. Sales in NSW and Victoria rose 0.7% m/m and 0.6% m/m, respectively, while sales in Queensland and WA fell 0.4% m/m and 0.7% m/m, respectively.

While consumer confidence has slipped a little in recent weeks, it remains well above average. The housing market also remains buoyant. If sustained, this should support retail spending in the near term. That said, the uncertain political environment both domestically and abroad is likely to weigh on confidence going forward, especially if a quick resolution proves difficult. We will be watching the evolution of the confidence data closely to gauge the potential impact on consumer spending.”