Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Saturday, 5 March 2016

New IKEA sends Canberrans shopping mad!

Retail robust

Retail Trade turnover increased by a seasonally adjusted +0.3 per cent in January to $28.4 billion.

Retail turnover has held up robustly to grow by +4.0 per cent in the year to January, in part assisted by a decline in the household savings ratio which I identified in the detail of the National Accounts earlier this week. 

State versus state

Over the past year retail turnover growth has generally followed house price growth, with the two most populous eastern states accounting for nearly three quarters of retail turnover growth, although turnover was flat in Victoria this month while increasing in every other state and territory.

In one territory retail turnover has gone absolutely ballistic over the past four months: the Australian Capital Territory! 

There are only two plausible explanations that I can think of: (i) the figures are dodgy, or (ii) the opening of the new IKEA has sent Canberrans absolutely shopping mad!

After recording unremarkable results up until September last year retail turnover is suddenly up by a rip-snorting +8.5 per cent in the ACT, an annualised result not seen since the financial crisis stimulus. 

Perhaps surprisingly retail trade has picked up strongly in the Northern Territory too.

Industry trends

Household goods has been the strongest sector over the past year as households look to renovate and improve their homes, while department stores struggle to compete with new online competition. 

Surprisingly, food retail was negative in January, declining by -0.24 per cent. Non-food retail increased by a much stronger +0.7 per cent having posted a decline in the preceding month. 

The year-on-year data shows the influence of the housing market up-cycle on industry sectors.

Other expenditure categories to have a good month in January included some hardware items and recreational goods. 

The wrap

The National Accounts this week showed a solid contribution from household consumption, suggesting that consumers are gradually becoming a bit more comfortable flashing their cash.

This may be due to a perception of improved job security, or it could be low interest rates finally working but with a lag.

Either way, excluding the unusual decline in food retail this was a decent result, suggesting that confidence may steadily be moving in the right direction.

Let's hope Canberrans have fun assembling all that flat pack furniture.