Retail Sales Outlook Looks Dire, NAB Says

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By Published On: May 17, 20180 Comments

The Australian retail sector suffered through miserable results in March, and according to the National Australia Bank’s (NAB) Cashless Retail Index, the results for the month of April look just as bad, if not worse.

According to recent data from the Australian Bureau of Statistics (ABS), retail sales in March flatlined with a growth of zero percent, with a number of categories experiencing a decline in revenue. This result is expected to be mirrored when the April results are released in a couple of weeks time.

In fact, NAB has reported a decline of 0.6 percent in the value of electronic transactions that were processed through its platform, which is the first decline the bank has seen since December 2017.

“Generally most sectors were weak in April, with only cafes, restaurants and takeaway stores recording a month-on-month gain,” the Chief Economist at NAB, Alan Oster said. “Food recorded the worst result, followed by clothing and footwear.”

Oyster believes these results don’t bode well for the ABS figures that are due for release at the end of May.

“Our mapping of the official ABS measure points to a fall of 0.2 percent,” he said.

NAB’s estimates aren’t always 100 percent on par with the official results released by the ABS each month; however, there is usually a strong correlation between the two reports, which is illustrated in the graph below.

Retail sales April

How NAB’s Cashless Retail Index compares to official ABS data.

NAB has also compiled the results of its latest Australian Business Survey, which also hints at a low-performing result for April.

“Our latest Australian Business Survey also showed retail business conditions turning negative in April for the first time this year, further suggesting that the retail sector is losing momentum again,” Oster said.

The NAB Index is generated from roughly two million personal transactions per day; from consumers using the bank’s NAB platforms. This encompasses sales across BPAY and PayPal, as well as transactions made with a debit or credit card.

According to Kate Hickie, an economist for Australia and New Zealand at Capital Economics, Australian wage growth and continued inflation could be one of the biggest contributors to poor results across the retail and hospitality sector.

“With households under pressure from low wage growth and a slowing housing market, and tax cuts unlikely to boost incomes until the second half of 2019, we expect consumption growth will slow to around two percent by the end of this year,” she said.

One downfall of NAB’s figures is that it doesn’t take into consideration spending across all financial institutions in Australia or cash transactions. However, current indications certainly point to a less-than-desirable April result.

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Heather Bone