Retail sales slowed in April, but still doing well
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Retail sales (excluding autos) slowed in April and stagnated month-on-month, growing by 5.3% yoy after March's 5.8% growth (after revision, previously 6.1% yoy), slightly missing analysts' expectations of 5.5% according to Reuters. The reported year-on-year growth is after adjusting for differences in the number of working days, but without adjusting it was 7.6% yoy, as this April had 3 more working days than a year ago. The sales volatility of the last two months was also driven by the Easter holidays, which have already partially fallen in March this year. However, after a stronger-than-expected March, the April trend is still favourable, although the stronger year-on-year momentum is helped by the lower comparative base from last year. Average annual real sales growth from January to April was 4.3%, a favourable figure that confirms strengthening household consumption on the back of gradually rising real wages and improving consumer sentiment. According to the current consensus, real sales are expected to grow by 2.5% this year after falling by 4.5% last year. However, the current data rather suggest the possibility of faster growth.
From a month-on-month perspective (seasonally adjusted), sales in April were only stagnant in real terms, while in March they rose by a strong 1.2%. For food alone, they even fell slightly in April (-0.2% after +0.5% in March), while non-food goods grew only slightly (+0.1% after 1.7% in March). The weaker month-on-month development in April is, however, somewhat expected, as this year's March figures were very favourable due to the fact that a large part of the Easter purchases already fell in March.
Year-on-year sales growth continued for the fifth month in a row, slowing slightly from 5.8% to 5.3% in April. Adjusted for March's lower number of working days (-3 y/y) and April's higher number (+3), excluding the aforementioned calendar effects, sales rose by 7.6% in April after 3.5% in March. On account of calendar effects, the differences are significant for both food and non-food goods (Graphs 1-3).
April retail sales were still performing well after the positive surprise in March, although they finished slightly below consensus, but the range of estimates was very wide (3.5-6.4%), illustrating the uncertainty associated with the impact of the Easter holidays. For the whole of this year, sales are up by an average of 4.3% year-on-year, 2.6% for food and 5.7% for non-food goods, a development above expectations. Retail sales in recent months thus confirm that household consumption is recovering on the back of renewed real wage growth and improving household confidence. While retail sales have fallen by 3.9% and 4.5% in the last two years (Chart 4), this year the consensus of economists expects them to rise by 2.5%. However, in the longer term, real sales are still around 2% below the 2019 average (Chart 5).
