Retail sales better than expected

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Good news on the economic front has been hard to come by lately and for all the talk of a retail spending drought the data this month and last was far from terrible (even if well below historic averages). Indeed this month’s 0.6% increase in retail sales for August matched the upwardly revised outcome for July and beat market economists forecasts of a rise of just 0.2%.

The table below highlights the key data:

 

Clearly the Australian shopper is spending more on cafes and restaurants than they are on clothing with the former up 1.2% in the month against clothing’s 0.3% fall. In trend terms the outcome is still quite stark with cafes and restaurants up 0.4% with clothing down 1.4%. As a behavioral economics and finance kind of guy this makes sense to me. On the 7.30 report last night there was a story on the trend toward second hand shopping with a particular focus on the Salvo’s new “up market” stores and a call for people to try not to buy anything new for the month of October. But you’ve got to eat and that’s where the money seems to be going – restaurants and cafes.

The chart below shows the recovery from the previous two months more worrisome outcomes, at least in aggregate terms, but crucially in aggregate terms the trend is still just 0.2% per month:

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But you might be able to actually spy some inflation in the next chart – just wondering out loud – because retail sales of food are quite strong year on year but total sales ex-food are only running flat year on year. My wife keeps telling me the staples of life are more expensive and that seems certainly to be the case:

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So does two good months suggest that the economy is not as bad as we had expected and many people are saying? It is too early to tell but you couldnt and shouldn’t rule it out of hand. But we’ll have to see how the data evolves over coming months – remember though this is August so we’ll see.

Does it have any implications for monetary policy? I’d say it won’t stop the RBA from easing if they feel the need given the mess the globe is in and what feels like a weakening economic outlook here and abroad.

Financial market prices haven’t reacted much at all to this number, they are focussed elsewhere.

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