Australia | May 05 2011
By Greg Peel
In February, Australian retail sales rose 0.8% (revised up from 0.5%) which surprised economists at the time but then replacement purchases in the wake of the Queensland floods were the clear driver. In January, sales grew 0.3%.
Economists had expected an increase of 0.5% as the March result, but instead were hit with a fall of 0.5%. At a time of retail sector stock weakness this is not great news. Clearly price deflation was an issue, as it has been for several months, given the change by volume of sales (as opposed to dollar value) was 0%.
On a year on year basis, dollar value sales were up 0.1% in March as they were in both February and January. This is nothing if not consistent, but 0.3% growth is the long term average and levels of 0.6% were standard in the heady days pre-GFC.
The big loser was department stores, which saw a 3.0% decline. Supermarket spending fell 0.4% and household goods 0.3%. Having been the big contributor to sales growth in February, Queensland went the other way in March and showed a 2.9% drop. Given rebasing (ie the February result moved the bar up), this drop is not that shocking.
Indeed, the Queensland effect over the past couple of months has led Westpac's economists to suggest the numbers are “a bit of a mess”. Nevertheless, the surprisingly weak net result has the capacity to drop another 0.2 percentage points off the March quarter GDP result, assuming not much of an offset from reduced imports and inventories, Westpac suggests. The bank's current forecast is for a 1.0% contraction in GDP.
The good news, if we can find any, is that the Aussie has dropped a bit further on the release.