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Retail sales yo-yo: evidence of the turmoil

Though it does not seem evidence is needed, retail sales data shows the extent of the turmoil being wrought on global economies and households right now. After screaming up by a record 8.5% in March and crashing down by a massive 17.7% in April, retail sales grew an enormous 16.9% in May. It seems impossible to credit, but year-ended May, retail sales were up 9.1.

There is no more crude – nor real – indicator of the health of the economy than the perceptions that are played out at the retail cash register. When we examine the chart below, we can certainly read panic buying into March, and we know that in April, the nation was at home, not at the shops.

But more than that, we know that in April job losses and lower incomes had really kicked in. That is why the result for May is perhaps a little harder to fathom.

Fig. 25

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

However, when we look at what changed from one month to the next, we get some clues about what sectors have fuelled retail activity. Sales of Furniture, Floor Coverings and Homewares slumped 4.8% in March and fell a further 11.5% in April, but recovered and then some, lifting by 21.6% in May. Shown on the blue columns below, this is mainly discretionary expenditure, so the March and April results make sense. We are not as sure the same can be said of expenditure in May, however.

So, what may have fuelled that expenditure growth? A little decoration, preparations for longer periods at home, merging of households (code for the kids returning home) and so on, but that does not seem to cover it all.

We have to think that economic stimulus (JobKeeper and JobSeeker), a sense of retail therapy and other ‘psycho-economic’ factors like underlying confidence, have played their part.

The nation’s spending patterns seem easier to comprehend on the Hardware, Building and Garden Supplies front. Growth in March (17.9%), April (25.6%) and May (33.6%) is entirely remarkable, but we know that locked down at home, whether working from home or no longer working, the nation has set itself up to be the great renovators. The data makes clear what we already knew.


Fig. 26

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

Some disturbing data has flowed through the national economy over the last couple of months. Credit card debt and expenditure in May being more skewed than normal to the ‘discretionary’ items are very clear examples.

We are right to be concerned about what will happen to the economy – retail sales included – when the stimulus packages end.

Posted Date: July 15, 2020

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