Pete Wargent blogspot

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

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Sunday, 4 September 2016

Retail flat again (far out!)

Retail flat

Seasonal adjustments for department store sales have delivered a bit of a wild ride in recent years, and this month's Retail Trade figures recorded a monster -6.2 per cent decline for the sector in July.

It's not the first time we've seen a 'far out' reading for department store retail (last time the figures snapped back the following month) - but we'll have to wait until next month to see whether that happens again.

In any event, this contributed a flat result in seasonally adjusted terms, for just a +0.1 per cent increase in trend terms.

Excluding the department stores reading retail turnover would have been up by +0.4 per cent for the month, so we'll have to wait and see what next month brings. 

Year-on-year retail turnover growth has sagged over the past year to just +2.7 per cent, to now sit well below the half decade average.

State versus state

The powerhouse states New South Wales (-0.2 per cent) and Victoria (-0.5 per cent) unusually both recorded negative results in July, possibly because department stores have their head offices in Sydney and Melbourne, though nobody really seems to know if that's why.

The only decent monthly results were seen in Queensland and South Australia.

Over the past year the opening of a new IKEA in Canberra was the spark to create the strongest retail turnover growth in the Australian Capital Territory (ACT), while the southern states have fared relatively well over the year to July.

This month's surprise negative result knocked the quarterly and annual figures for NSW and Victoria quite hard.

Note how demand in the the resources rich Northern Territory has fallen away in tandem with Western Australia, where iron ore and LNG construction projects have recently transitioned to production.

Department stores crunched

Erm, and then there's this. Maybe everyone stopped shopping for a month and there's a rebound pending, or perhaps the timing of revenues being booked is a bit of a lottery.

Leaving aside the department stores outlier, it's become clear that the household goods boom that piggy-backed off rising house prices as now ended. 

Food retail turnover was also weak in dollar terms, in part reflective of soft food prices and intensified competition from low cost supermarkets such as Aldi.

The best performing sector of the year has been clothing and footwear.

The wrap

A rubbish result! We won't know until next month whether department store retail turnover was an anomaly, but it was an inauspicious start to Q3 for retail trade!