Retail sales up again, but it’s a wild ride

Retail sales continued their roller coaster ride in June, with monthly sales reportedly up 2.7%, and annualised sales up a substantial 11.7%. Doubtless, the current situation in Victoria is likely to be a drag on sales in July and August, but the actual outcome remains somewhat uncertain, for the next couple of months, and is very dependent upon stimulus support payments. As that support eases and we transition to a post COVID 19 economy then the outlook for retail will become clearer and possibly bleaker.

In some respects, the first chart here should stop the show, because much hackneyed though it is, the recent history of retail sales in Australia is utterly unprecedented. It doesn’t matter how far back we go, it is just simply impossible to find a time like this, with the highest highs and the weakest lows ever recorded.

Fig 29

To go straight to the dashboard and take a closer look at the data, click here.

By June, as a faltering and ultimately too early recovery looked as though it was on its way, retail sales managed to grow by 2.7% in what was still a very patchy retail economy.

Massive though it is, June went somewhat unremarked because May saw the largest ever increase (16.9%) and April had seen the largest ever fall (-17.7%) and that came after March set the previous record high (8.5%).

Each of these months represented a different period of pandemonium in the pandemic-economy. March saw panic buying and hoarding, April saw a nation locked down and unable to spend, especially on some key discretionary items like entertainment. May saw social liberation, something of a splurge and the beginnings of a return to some normalcy and June was variable across the country, but stimulus’ supported spending saw retail sales grow solidly again, but in a less spectacular manner.

We think this is reflected below, where when all was said and done, quarterly retail sales were down – in real terms, adjusted for all the palaver – by 3.4, which in turn dragged sales down by 2.3% on an annualised basis.

Fig 30

To go straight to the dashboard and take a closer look at the data, click here.

Retailers will have known this in their cash flows, across their inventories and in their souls. To be clear, the June quarter was the worst on record for retail, across the country, but not for all retailers (think of the supermarkets) and not for all sectors and activities.

Our third chart shows retail sales for particular sectors, compared with the national aggregate. The green bars shows the runaway performance of the hardware building and garden supplies sector and the blue the more varied performance of the furniture, floor coverings and homewares sector.

Fig 31

To go straight to the dashboard and take a closer look at the data, click here.

We can see that the furniture and furnishing group was initially hard hit. In March and April, who was out buying discretionary household items? Not many of us were even out at all. By May and June, the trend was reversed and sales had picked up by the proportions shown in the table below.

For the Hardware, building and garden supplies sector, its as simple as this: sales have never been better. Presumably our collective houses are now much improved and our gardens are set to bloom magnificently when spring comes.

If spring comes, a retailer might say. Because for many, July was their winter of many discontents and Spring may offer no respite to the woes they have faced.

Why not? Because at the end of September, when the economic stimulus begins to be wound back, and unemployment rises sharply as is widely anticipated, household incomes and the capacity to spend may be so diminished that for the retail sector, this could be a very bleak spring and potentially, the harshest Christmas on record.

That is why government stimulus is continuing, in its various forms, becoming more nuanced and targeted as time passes. Just like the health risks we collectively face right now are difficult, building the bridge to the other side also has many uncertainties. Just ask a retailer!