Retail sales rose above expectations in June
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Retail sales (excluding autos) accelerated slightly in June, rising 4.4% year-on-year after May's 3% growth (after revision, previously 4.4%), finishing marginally above analysts' consensus expectations of 4.1%, according to Reuters. This year-on-year growth is after adjusting for differences in the number of working days, which were 2 less in June this year than last year. Unadjusted, growth was 1.8%. In June, sales growth was mainly driven by non-food goods, while food sales recorded a month-on-month decline of 0.8%, the sharpest drop in more than a year. Despite the volatile retail sales figures and frequent revisions, year-on-year growth in the first half of the year was 4.1%, 3% for food and 5.5% for non-food goods, while overall it fell by more than 4% last year. Hence, rising real wages and more favourable consumer confidence are supporting household spending again this year and developments in the first half of the year can be viewed positively, although household confidence itself has fallen slightly again in recent months.
On a month-on-month basis (seasonally adjusted) sales grew by 0.7% in real terms in June while they fell by 0.5% in May. However, the trend was mixed, while food sales declined 0.8% in real terms, non-food sales rose 1.6%, the second strongest month-on-month pace this year. Sales were dragged down by, for example, internet sales and sales of cosmetics.
YoY sales growth continued for the seventh month in a row, with June's coming in at 4.4% after a revised 3% in May. However, without adjusting for calendar effects, growth was weaker, and this was also true for the sales sub-categories (Charts 1-3), as this June had two less working days than last June.
While June retail sales ended above analysts' expectations, the May number was revised downward and overall this year's figures are quite choppy with significant revisions. This does not change the fact that they showed a solid annual increase of 4.1% for the first half of the year, and 5.4% for non-food goods. Overall, household consumption in the first half of the year was positive, driven by growth in real wages and consumer confidence (Chart 4). Although the latter has fallen slightly again in recent months, retail sales are still expected to rise by around 4% this year, compared with declines of 3.9% and 4.5% in the last two years
