Stimulus cash keeps retail sector on track

CONSUMERS flush with almost $50bn in government stimulus and early superannuation withdrawals propped up the retail sector while other parts of the economy were buffeted in the past quarter, research shows.

But investment bank Citi has warned that as coronavirus restrictions ease, consumer spending could be redirected and prompt a sharp fall in retail sales. Citi analyst Craig Woolford said an analysis of the national accounts, released this week, provided “a useful insight, highlighting that retail has won in terms of its share of spending and (household) income has been propped up by the government”.

“In the June quarter, consumer spending fell by 12 per cent, while retail spending rose 2 per cent,” Mr Woolford said.

“Household incomes rose by 8 per cent, but if we strip out the government support they would have fallen by 9 per cent.”

He said the rise in retail’s share of spending in part reflected restrictions on other forms of discretionary spending, but also the desire of some to spend on food essentials and the home.

Once that stimulus starts to taper off, or the ability to make early withdrawals from superannuation ends, it will have an immediate knock-on affect to retail sales, he said.

“The outlook is for slower retail sales growth in our view, because the size of the stimulus to households will likely fall while the underlying pressure on incomes from fewer jobs and lower wage growth should remain,’’ Mr Woolford said.

“Moreover, as restrictions ease, households should start to redirect their spending outside of retail.”

Separately on Thursday, National Australia Bank said its online retail sales index had surged 62.6 per cent in July compared with the same month last year, breaking the record set in April.

Month-on-month, online retail sales grew 6.7 per cent, seasonally adjusted.

NAB chief economist Alan Oster said games and toys, fashion, and takeaway food all recorded double-digit growth in the month.

“We estimate that in the 12 months to July, Australians spent $37.4bn on online retail ... about 28.6 per cent higher than the 12 months to July 2019,” Mr Oster said.