Retail sales rose significantly in March
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Retail sales (excluding cars) accelerated significantly in March, with annual growth of 6.1%, beating analysts' expectations of 2.7%, according to Reuters. This annual growth is after adjusting for differences in the number of working days, and without adjusting it was 3.8% yoy. However, the stronger reading for March should also be seen in the context of the Easter holiday, which this year fell partly in March and statistical methods of cleaning may not always accurately adjust for it. The values for the last few months are therefore volatile due to calendar effects, but the values from the beginning of the year confirm a faster recovery in consumer demand.
On a month-on-month basis (seasonally adjusted), sales grew by 1.3% in real terms in March, which is similarly strong to January, which was also exceptionally strong (after revisions). Growth in food was 0.5%, but real sales of non-food goods grew more strongly, by 1.8%. The month-on-month figures are adjusted for seasonal and calendar effects, but the distribution of Easter and related purchases may not always be well captured.
On a year-on-year basis, sales growth continued for the fourth month in a row, accelerating to 6.1% in March, the strongest momentum since early 2022. The figures are adjusted for fewer working days this year (-3 y/y), and unadjusted annual sales growth was 3.8% (Chart 1). The differences in adjusted and unadjusted annual growth are then significant for both food and non-food goods (Charts 2 and 3). In the case of food, the annual growth rate accelerated from 2% to 4% yoy (adjusted), while for non-food goods it rose from 3.6% to 7.7% yoy (unadjusted 6.3% yoy for food and 1.9% for non-food goods).
March retail sales thus came as a significant positive surprise, but the figures should be taken with a grain of salt given the strong impact of calendar effects and Easter. While statisticians try to clean the data of these effects, these are only estimates and may not always accurately capture the factors mentioned. Retail sales figures also tend to be revised quite significantly, which also reduces their actual telling power. However, despite these uncertainties, it is clear that household consumption is recovering in the first quarter of this year, and at a faster rate than expected. This is related to a faster improvement in household confidence and a return to real wage growth. However, in real terms, sales remain 2% below the 2019 average, and more than 9% below the 2019 average for food (Chart 4).
