Australian Retail Sales: September 2022 - The canary continues to sing

About the author:

Author name:

By Alexander Mees

Job title:

Co-Head of Research and Senior Analyst

Date posted:

02 November 2022, 8:00 AM

Sectors Covered:

Gaming and Retail

• Preliminary data from the ABS indicate that retail sales continued to hold up in September 2022. Sales inched up 0.2% month-on-month (m/m) to hit a new record of $35.1b. This was the ninth consecutive month that retail sales increased m/m. On a year-on-year (y/y) basis, the growth was +17.9%, cycling the last full month of lockdowns in NSW and Victoria in the prior year. Inflation is playing a part in pushing the dollar value of retail sales to new heights, but the unavoidable fact remains that the Australian consumer has yet to pull back in any meaningful way. Although the cost of living is escalating, unemployment remains low and savings rates remain high.
• Clothing & Footwear was the best performing category, both on a y/y basis, where it was cycling weak lockdown-affected comps, and a m/m basis. After that, it was Eating Out and Groceries that performed best m/m. Household Goods fell back by 0.8% m/m (the worst performing category), but was still 10.6% higher y/y and is far from showing signs of material weakness.

Australia gets back to normal after lockdowns last year

Spending on Clothing & Footwear was significantly impacted last year by COVID lockdowns in NSW and Victoria. With Australian society getting back to normal, this category has been the best y/y performer over the past three months.

In September, Clothing & Footwear sales rose 70.4% y/y. In a similar vein, Department Stores and Eating Out were also strong y/y performers, up 53.6% and 52.6% respectively.

Even on a m/m basis, however, Clothing & Footwear and Eating Out showed the best growth, up 2.0% and 1.3% respectively.

Household Goods sales plateauing, but not collapsing

Household Goods spending declined by 0.8% m/m in September, having risen by 2.6% m/m in the previous month. The category continues to hold up well, with sales running well above 2019-2021 levels.

October and November last year saw a strong rally in Household Goods sales, so it’s likely the headline y/y moves over the next couple of months could look more negative.

Nonetheless, this category is often seen as the canary in the coal mine for consumer spending and so far the canary continues to sing.

Australia still significantly outperforming the UK and the US

Australian retail sales growth of +17.9% y/y in September was well above the US (+8.2%) and the UK (-6.2%).

Of course, Australia is cycling lockdown-affected comps, but the trends continue to look favourable for this market.

Figure 1: : Retail sales growth in the UK, the US and Australia

Source: ABS, Bloomberg, Morgans.

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Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.