The research team at Westpac, explains that the Australian March retail sales report came in well below expectations although the detail points to weather as a major factor in both the month and the quarterly result.
“Total retail sales dipped 0.1% in March vs expectations of a 0.3% rise. Sales had dipped 0.2% in Feb as warm weather, aggressive discounting and clothing store closures impacted. Inclement weather had a more substantive negative impact in March which featuring abnormally wet conditions over the eastern states and Cyclone Debbie impacting Qld and parts of NSW late in the month. Qld bore the brunt of the impact with retail sales falling 1.3%. Sales across the rest of Australia rose 0.2%.”
“Q1 real retail sales also came in well below expectations, rising just 0.1% vs consensus forecasts of a 0.5% gain. Weather was again a key factor: sales in Qld contracted 1%qtr while sales across the rest of Australia rose 0.4%qtr.”
“Price discounting was not quite as aggressive as expected, the retail deflator rising 0.1% vs an expected 0.1% dip.”
“The impact of severe weather makes interpreting storetype results difficult with the event likely to have impacted different categories to varying degrees and quarterly storetype estimates not available by state.”
“As they stand the national figures show a 0.6% rise for food retail, 0.4% gains for household goods and ‘other retail’, flat sales for department stores, cafes & restaurants and a sharp contraction in clothing retail. The latter saw a several chain stores close early in the year. The monthly sales detail suggests Qld’s weather impact was more pronounced for cafes & restaurants, ‘other retail’, department stores and clothing.”
“The weaker than expected retail report highlights downside risks to the broader consumer spending estimates in the Q1 national accounts – due June 7. Our starting point is already soft with spending estimated to have risen just 0.5%qtr. With available partials now showing flat retail and a modest dip in motor vehicle sales, that gain rests on services spending retaining reasonable momentum. While there are few indicators of actual spending for these consumer sectors, recent business surveys suggest conditions have indeed held up reasonably well.”
“Looking further ahead, next month will clearly see sales rebound from weather effects. While weather dominated in March, it was against a backdrop of soft conditions and aggressive price competition. The tone of the April bounce will give a better idea of just how soft the sector really is.”