Winter blast keeps Aussie retail market in the black

Bloomberg

Australian retail sales limped through June, saved only by a blast of winter weather that forced shoppers to stock up on warmer clothing and compounded by mid-year discounts.
A more realistic reading of the month came in the food section, which showed even alcohol sales actually fell in June. While households got a rate cut in May, adding cash to their wallets, June was also the final weeks of an extended and close election campaign that may have damped spirits.
June retail sales rose 0.1 percent in the month; economists estimated a 0.3 percent increase Second-quarter retail volumes advanced 0.4 percent compared to forecast 0.5 percent Food prices fell 0.6 percent, the most since February 2014 Clothing, footwear and personal accessory retailing was the biggest climber at 3.5 percent, the largest increase since November 2009

BIG PICTURE
The data fit into a steady theme: retail sales have been relatively weak of late as stores lack pricing power due to an increasingly competitive market, where major offshore groups and supermarkets are muscling in. While monthly sales are based on price, the quarterly numbers are based on volume. The latter tend to look comparatively better because stores are moving reasonable amounts of goods — but they’re only managing to do so with heavy discounts.
At a policy level, the central bank is looking for higher consumption as households draw down on their strong savings while interest rates are at record lows, unemployment is below 6 percent and rising house prices provide a wealth effect. Further complicating the picture is that the retail data doesn’t capture a large proportion of consumption that takes place online.

ECONOMIST TAKEAWAYS
“With early June seeing one of the heaviest storms across the eastern Australian coast for some years, we were looking for a softer-than-market outturn,” said Adam Boyton, chief economist for Australia at Deutsche Bank AG. “We would be surprised to see yearly growth in retail sales return to mid-2015 rates of near 5 percent given the soft outlook for prices.” “The weaker-than-expected rise in real retail sales in the second quarter points to a slowdown in consumption growth and adds to the growing evidence that gross domestic product growth weakened significantly, perhaps to less than 0.5 percent QoQ, last quarter,” said Kate Hickie at Capital Economics in Sydney.
Supermarket and grocery prices fell 0.5 percent in June Other specialized food retailing declined 1.7 percent; and liquor retailing slid 0.1 percent Clothing sales jumped 4.7 percent; footwear and other personal accessories advanced 1.2 percent Cafes, restaurants and catering services slid 0.3 percent; while takeaway food services rose 0.1 percent.