There’s nothing for the Reserve Bank at its first board meeting of the year today from yesterday’s retail sales. On the face of it the seasonally adjusted fall 0.1% was weak and less than the market’s expectations for a 0.3% rise.
But according to the AMP’s chief economist, Dr Shane Oliver there was an odd reason for this (more of that later).
But the 0.9% rise in volumes for the quarter (above forecasts for a 0.8% rise) was a bit of a surprise and up from 0.1% result for the September quarter (revised down from the originally reported 0.2%).
The 0.9% rise in volumes for the quarter (above forecasts for a 0.8% rise) was a bit of a surprise and up from the unchanged figure for the September quarter (revised down from the originally reported 0.2%). But not only was the quarterly rise in volumes stronger than the 0.5% rise in the December quarter of 2015, it was the highest quarterly rise since the 0.9% jump in the three months to December 2014.
That will make the central bank and its economists much happier than the weak monthly figure (in seasonally adjusted terms).
The ABS said the main contributors to solid quarterly rise were household goods retailing (2.5%), clothing, footwear and personal accessory retailing (1.5%) and food retailing (0.3%).
The fall in December means that for a second year at least all that excited media talk about a “good Christmas”. Seasonally adjusted sales were flat in December 2015.
The trend estimate for Australian retail turnover rose 0.3% in December 2016 following a 0.3% rise in November 2016. Compared to December 2015, the trend estimate rose 3.2% (but the seasonally adjusted rise was 3.0%).
CommSec senior economist Savanth Sebastian said the 0.9% rise in quarterly sales volumes was a "pretty solid result overall" and suggested Australians had done their shopping early rather than hitting the shops just before Christmas.
The ANZ said the December results were "well below expectations [of a 0.3 per cent rise], with the weakness concentrated in hardware and building sales and a decline in sales in NSW and Victoria".
“While the rise in retail sales volumes in the fourth quarter is reasonably solid … the weakness in the November and December monthly sales suggests first quarter [of 2017] average growth is likely to slow,” ANZ economists said.
The Australian Bureau of Statistics said there were falls in household goods retailing (down 2.3% in the month year-on-year), and other retailing (down 0.2%).
But there were rises in food retailing (up 0.5%), clothing, footwear and personal accessory retailing (1.4%), cafes, restaurants and takeaway food services (0.2%), and department stores (0.3%).
But Dr Oliver said in a note to clients yesterday that a sharper than expected fall in hardware retailing was the cause of the small fall overall.
“The fall in retail sales was driven by an unusual 6.6% fall in hardware and garden supply sales which looks like a bit of an aberration,” he wrote.
"More significantly soft nominal retail sales growth was driven by very weak price increases with the retail price deflator up just 0.3% quarter on quarter in the December quarter or 1.3% year on year. As a result retail sales volumes rose a solid 0.9% in the December quarter up from flat in the September quarter.
“The bounce back in December quarter retail sales volumes suggests that consumer spending has bounced back solidly after September quarter softness and adds to confidence that GDP growth will rebound in the December quarter after the September quarter contraction, thereby avoiding a technical recession,“ Dr Oliver wrote.
And the reason for that fall – the final closure of Masters hardware stores by Woolies. So forgetting that and the retail sales figures were much stronger than the 0.1% suggests, and 4th quarter GDP will be stronger as a result.
