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Australia: Very slow growth in cashless retail sales continues - NAB

NAB’s proprietary indicator of Australian retail sales reveals a continuation of very slow growth in recent months and it follows some stronger outcomes in the second quarter of 2017, points out the research team at NAB.

Key Quotes

“The yearly rate of growth dropped to 6.5% in October from the recent high of 8.7% in May (in seasonally adjusted terms), which is the weakest rate in the three year history of the series.”

“In monthly terms, NAB’s Cashless Retail Sales Index increased marginally by 0.2%. Based on movements in NAB’s data and our data mapping techniques, ABS retail trade is expected to rise by 0.1% mom in October, a disappointing outcome given the flat result in September and decline of 0.5% in August.”

“By sector, spending on food (5.1% yoy) and household goods (2.5% yoy) has slowed the most in yearly seasonally-adjusted terms and has actually contracted in monthly trend terms for the past three/four months. For household goods, the slowdown has been most apparent in the hardware & garden sub-sector (-2.7% yoy). Meanwhile, spending growth for department stores has picked up in recent months (4.0% yoy), and also remains strong for cafes, restaurants & takeaways (14.1% yoy).”

The slowing in recent months has been most pronounced in NSW and to a lesser extent WA and Queensland. Yearly growth is now strongest in the ACT (7.8% yoy) and Victoria (7.6% yoy). It is also reasonably solid in NSW (6.8% yoy) and SA (6.3% yoy) despite the recent deceleration. Retail sales growth in WA is much weaker than the national average and continues to trend down (2.8% yoy).”

The NAB Cashless Retail Index is broader than the NAB Online Retail Index and measures all cashless retail spending by consumers using debit and credit cards (both in person and online), BPAY and Paypal. The index is derived from personal transaction data from NAB platforms (around 2 million transactions per day) and offers a 2-3 week lead on ABS retail trade data. Cashless sales to consumers have been growing more rapidly than the ABS measure of retail sales in recent years (6.8% yoy in September versus 1.4% yoy), although the gap in growth rates has narrowed. Further convergence is likely as the penetration of online and contactless payment systems reach a limit (reflecting minimum spend requirements for cashless transactions and the existence of a proportion of merchants who deal only in cash).”


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