Pete Wargent blogspot

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

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Sunday, 6 November 2016

Avocados smash (retail trade up 3.3pc)

Retail trade rebound?

Retail turnover easily beat expectations comfortably to rise by +0.6 per cent in September to $25.3 billion, while the result for August was also revised up a notch to +0.5 per cent (woop).

Total industry turnover was up by +3.3 per cent from a year ago, a fair old improvement on recent results.

State versus state (up across the board)

Retail turnover increased across every state and every territory in the month, for a pleasant change.

Over the past year, the strongest growth has been in the Australian Capital Territory.

Can we still cite the new IKEA? I think we can - there's not a lot of other entertainment in Canberra, after all.

Retail turnover also leapt by $95 million over the third quarter in Queensland, or +1.9 per cent, for no apparent reason that I can think of. Higher fruit and veg prices, maybe.

Industry groups (dining out)

There was a strong monthly lift in household goods sales (+2.3 per cent), while cafes, restaurants, and takeaways retail yet again lifted by +1.0 per cent in September to $3.64 billion, easily a record high.

No doubt, we've all heard enough about young people spending too much on smashed avocado breakfasts for at least ten lifetimes (probably more). 

What cannot be disputed is that the rise in spend on eating out has been inexorable, and not only in nominal and real terms.

As a share of total retail expenditure, spending on dining out has never been remotely as high as it is today - at this rate it could very soon account for a frankly ridiculous one sixth of total retail turnover!

This could arguably be because young people have given up saving for deposits, though I'd argue that at least a big a factor has been that old people never used to eat out, while now they're sipping on flat whites seemingly everywhere.

Anyway, this entire debate has become far too dull to be continued further here.

The wrap

A big beat, upwards revisions, and month-on-month increases in every state and territory. So, all good then!

Except, not really.

Don't get me wrong, I hate it as much as anyone when people talk down strong data releases just because they like to be relentlessly negative (or have an agenda to spin everything negatively).

But in this case they'd be right to do so, for the reason that the improved headline result over the last quarter was driven by a blip in prices, not increasing volumes.

In fact, when measured in chain volume measures terms, retail volumes declined by -0.1 per cent in Q3, which will be a subtraction from quarterly GDP growth.

Not dissimilarly, the international trade figures suggested that net exports will also be a drag on economic growth this time around.

Thus, after a surprisingly strong run, we can expect to see annual GDP growth snaking back towards ~2.5 per cent, while futures markets are just keeping a February interest rate cut in mind as an outside bet at a 1-in-4 shot.