Australia: Lacklustre retail growth following tax and rate cuts – ANZ

ANZ analysts note that Australia’s retail sales grew by 0.4% in August, below ANZ and market expectations and suggests that this upgrade compared with recent months (0.2% m/m average for the last 6 months) represents the early effects of tax and rate cuts.

Key Quotes

“Annual growth increased to 2.6%. This is a little higher than the past few months, but still below the 1-yr, 3-yr and 5-yr averages.”

“Clothing was a standout, with 4.9% y/y growth after a strong monthly result (1.8% m/m). Department stores (1.1% m/m) and recreational goods (2.9% m/m) also saw strong monthly growth, hinting that tax cuts were stimulating short-term discretionary spending.”

“In y/y terms, key non-discretionary categories including supermarket and grocery stores (4.2% y/y) and pharmaceutical, cosmetics and toiletries (4.8% y/y) continued to see stronger growth than discretionary categories. This speaks to the longer term budget pressures on households, who are focusing more on “essentials” and less on “nice to haves”.”

“Monthly growth was strongest in QLD (0.8% m/m) and ACT (1.9% m/m) while annual results show strength in QLD and VIC, and weakness in NSW.”