UBS: Size of economic hole “larger than expected”

Via the excellent George Tharenou at UBS:

Mar retail values boom record 8.5% m/m (10.1% y/y); but one-off panic buying
Retail sales values in Mar-20 were revised up to a record high, since at least 1982, of +8.5% m/m (from the preliminary +8.2%), and February was also revised up a tick to 0.6% (was 0.5%). The y/y also jumped to 10.1%, the strongest since 2001 (due to the GST distortion); albeit after previously weakening sharply in February to 1.8%, near a record low. However, the spike in March was obviously a one-off, drive by panic buying. Growth was driven by food (24.1% m/m, 27.2% y/y); while non-food actually fell the most since the GST distortion (-2.7% m/m, -1.9% y/y. Importantly, for listed companies, there were two positive trends which accelerated quickly due to mobility restrictions, albeit broadly as would be expected. Large retailers – which are mostly listed – took a lot of ‘market share’, with a record increase (since at least 1995), up 12.4% m/m & 16.2% y/y (after 3.7% y/y). In contrast, small retailers continued to contract, and posted a ~record fall (-1.4% m/m, -4.2% y/y). Similarly, total online retail sales boomed by 19% m/m and 32% y/y, the strongest annual growth since 2018. The online share of total retail bounced to 6.6% (after 6.0%), and is likely to increase much further in coming months. Looking ahead, we think normalisation of food (particularly supermarket) spending, along with continued weakness in discretionary retail, is likely to see a record collapse in April retail sales that is far larger than the rise in March. (Looking back to the introduction of the GST in 2000, demand was pulled forward to beat the price rise, seeing June spike 8.1% m/m, but July collapsed 10.6% m/m.)

Q1 volumes up less than expected 0.7% (1.1% y/y), amid higher food prices
However, retail volumes in Q1-20 surprised materially on the downside, rising by only 0.7% q/q (UBS 2.0%, mkt: 1.8%, pre: 0.5%), recovering to a still weak 1.1% y/y. This reflects higher than expected prices (1.9% q/q, 3.5% y/y), especially food (2.6%, 5.6% y/y), also pushed up temporarily by bushfires (albeit Q1 CPI has already been released).