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Why subdued retail growth in November is no surprise: RBA retail figures

Posted on Jan 9, 2015

RBA retail figures 9 Jan 2015: comment from David Lane, director of Wealth Management at Pitcher Partners

The ABS  this morning released Retail Trade figures for November, showing a subdued rise of 0.1% in November, with an annual trend rise of 4.5%.

The subdued retail growth in November is not a surprise, and has been largely flagged by retailers who had been experiencing a soft pre-Christmas period in November and early December.  This had prompted a number of large retailers to bring forward traditional Boxing Day sales to be pre-Christmas sales.  Anecdotally, this had the desired impact with many stores experiencing strong pre-Christmas sales in the final weeks of December.  We are likely to see this impact in stronger numbers for December retail trade.

Food and Household Goods rose 0.6% (seasonally adjusted), while spending at Cafes, Restaurants and Takeaway Food rose by 0.8% in seasonally adjusted terms.  Notably, spending on Clothing, Footwear and Personal Accessories fell 0.7% in seasonally adjusted terms.  Online sales for these goods are one of the fastest growing segments. Perhaps the above behaviour, combined with ABS statistics for online retail trade, are more descriptive of the changing habits of the Australian consumer.  Online sales rose 5.2% in November, following a rise of 9.8% in October.  It seems that more Australians are purchasing planned Christmas presents online, while running to the air conditioned shopping centres in late December and January for last minute gifts, eating out and entertainment.

Adding to expectations of a more solid December / January retail spend is the recent decline in petrol prices.  The cheaper price at the bowser has the potential to improve short term consumer sentiment, with the additional cash in our pockets over the holiday period adding to discretionary spending.  We believe that the significant fall in oil prices has the potential to improve consumer sentiment and discretionary retail spending in early 2015.  Additionally, the decline in the oil price should improve retailers’ margins as transport is a significant input cost.