The recovery in consumer demand will be gradual. Retail sales slowed to 1.6% in February
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Retail sales (excluding autos) in February did not repeat January's positive surprise, when their annual growth reached 1.6%, falling short of analysts' expectations of 2.3%, according to Reuters. However, the positive news is that January's figures were revised further upwards from 2.4% to 3.2% (Chart 1). The aforementioned figures are adjusted for the effects of the number of working days; without this adjustment, real sales grew by a strong 6.1% year-on-year, which is largely the effect of the transitional year.
On a month-on-month basis (seasonally adjusted), real sales fell by 0.8% in February, whereas they had been rising in the previous four months. It was also the strongest month-on-month decline since March last year. In this respect, the decline was relatively broad-based and was recorded by sales of food (-0.8% mom), non-food goods (-0.8%) and fuel (-1%). Only car sales rose (+1.1%). However, February's month-on-month decline in sales has to be taken in the context of the very strong January figures, which were probably related to the post-Christmas sales.
On a year-on-year basis, sales growth continued for the third month in a row, although it slowed from a strong January (1.6% after 3.2%). In food, the year-on-year rate accelerated slightly to 1.1% after 0.8% in January, while it slowed to 2.4% after 4.5% in non-food goods. The year-on-year figures are adjusted for the difference in the number of days this year, which was also affected by the transitional year. Unadjusted, the year-on-year figures are thus noticeably higher (Charts 2 and 3), exceeding 5% for food and almost 7% for non-food goods.
February retail sales, while showing more favourable dynamics compared to last year, confirm that January's figures were somewhat specific and do not show such a sharp improvement in consumer demand. If we average the January and February figures, they are slightly above last year's average, confirming a slight recovery in consumer demand. This goes hand in hand with the recent evolution of consumer confidence, which, although improving, remains in a slightly "crisis" mode (Chart 4). A similar European Commission household survey also suggests that domestic households are becoming less negative towards large purchases, which should also be positive for consumption (Chart 5), but the improvement is rather gradual. However, despite a gradual recovery in recent months, overall sales remain 4% below their 2019 average level (Chart 6) and it would be a rather positive surprise to see them return to that level later this year.
