Retail sales up just 0.1% in May, well below expectations

May was a lacklustre month for the retail sector and retail property landlords with just a 0.1% rise in retail turnover recorded over the month, according to preliminary ABS figures.

This follows a downwardly revised 0.1% fall in April. ABS had previously estimated a 0.2% increase in April.

The median forecast among 28 economists surveyed by Bloomberg was for a 0.3% rise in retail sales in May.

Through the year, Australian retail turnover rose 2.3% in May 2013, seasonally adjusted, compared to May 2012.

retail_trade

The largest contributor to the rise in May 2013 was other retailing (0.8%) followed by food retailing (0.2%), department stores (0.8%) and clothing, footwear and personal accessory retailing (0.4%).

These rises were largely offset by falls in cafes, restaurants and takeaway food services (-0.6%) and household goods retailing (-0.3%).

Over the longer term, food retailing remains the largest contributor to growth (up 0.3% in trend terms). 

Commonwealth Bank economist Gareth Aird says the retail sector has had a mixed 2013, so far. 

"Spending was up solidly in the few two months of the year, but has since tapered off.

"In particular, sales over the last few months have been sedate. 

"Some of the recent retail trade outcomes are reflecting the divergence between the real and nominal economies. 

"Over the first quarter of 2013, real retail trade was growing at a faster rate than nominal sales, which is rare. 

"The divergence was reflecting discounting in some parts of the retail sector, particularly the household good retailing category which largely comprises imported goods.  These goods have been made cheaper by a strong Aussie dollar. 

"But the currency has depreciated by around 10% since its peak over the last two months, so we are unlikely to see the divergence between nominal and real outcomes continue. 

He says the 10% fall in the Australian dollar will benefit the sector by making overseas holidays less attractive. 

"And it also means purchasing online from international retailers is more expensive.  Both of these shifts in relative prices support domestic retail trade. 

"In addition, household disposable income has been boosted from interest rate cuts.  These take some time to work their way through the economy with some mileage still to come from the most recent rate cuts," he says.

The state which was the largest contributor to the rise in May was Western Australia (1.6%) followed by Queensland (0.5%), South Australia (0.6%), Tasmania (0.6%) and the Northern Territory (0.8%).

These rises were largely offset by falls in New South Wales (-0.4%), Victoria (-0.3%) and the Australian Capital Territory (-1.7%).

Over the longer term, New South Wales remains the strongest contributor to growth (up 0.4% in trend terms).

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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