Yesterday’s strong retail sales figures, released by the Australian Bureau of Statistics (ABS), were generally greeted with enthusiasm in the media. For instance, Bloomberg reported the result as follows:
Australian retail sales rose at more than four times the pace that economists forecast, capping the best quarter since 2009 as consumers spent more at restaurants and clothing stores.
Sales adjusted to remove inflation jumped 1.8 percent in the three months through March from the prior quarter, the Bureau of Statistics said in Sydney today. That was the biggest gain since the second quarter of 2009…
The data span a period when the Reserve Bank of Australia paused interest-rate reductions as optimism gained on the global outlook and the domestic resource-investment boom, even as reports mounted of job losses in manufacturing and tourism because of the currency. RBA Governor Glenn Stevens last week reduced rates by half a percentage point to a two-year low of 3.75 percent, and traders are betting on another cut next month.
“Today’s strong result tells a differing story to retail industry anecdotes, the RBA’s liaison as well as recessionary levels of household perceptions on year-ahead finances,” said Celeste Tay, a Singapore-based economist at 4cast Ltd. “We see the RBA likely to help alleviate strains on the non-mining sectors of the economy with a follow-up rate cut in June.”
While the March retail sales figures were strong – a 0.9% increase over the month is a good result in anyone’s language and is a welcome relief from the record bad run – the result needs to be viewed through a longer-term lens.
The fact of the matter is that, even with the latest result, retail sales when adjusted for inflation and population growth are still very flat (see below chart).
In fact, real per capita retail sales are at exactlty the same level as June 2007. This compares to the decade prior to 2007, when they were up 41%, or 3.5% per annum on average (see below chart).
Despite the recent bounce in sales, the retail sector in Australia is still bleeding. And it will take months of further strong gains to put the sector back on track.
