Retail spending surprises

Department stores lead month’s unexpected gains

RETAIL spending beat market expectations to register a slight rise of 0.3 per cent in August, with department stores posting the biggest gains.

Seasonally adjusted retail spending for the month was $26.87 billion, up from a flat $26.79 billion in July, the Australian Bureau of Statistics said yesterday.

Department stores recorded the strongest spending growth for August, up by 0.9 per cent to $1.56 billion, having dropped 1.8 per cent the previous month.

Clothing, footwear and personal accessories spending also lifted, up 0.8 per cent for the month, after a 2.1 per cent fall in July.

August’s gains were held back by flat food retailing spending.

Some analysts said the rise needed to be viewed in context, with comparisons to a flat July trade not necessarily confirming a booming turnaround for August.

“The increase in August isn’t dreadful, but it’s tempered by the fact that July was essentially flat, and when you look at those two months together it’s actually not so great and that’s been the story for retail throughout this year,” chief economist at BIS Oxford Economics Sarah Hunter said.

She said retail was being squeezed by high prices for essential items, including electricity, gas and health insurance, while headwinds facing households including snail-paced wage growth and a drop in house prices had also weighed heavily on retail spending.

In the face of falling house prices and rising fuel charges, the rise in retail sales was “somewhat surprising”, ANZ said in a statement yesterday.

An increase in competition from the rapidly growing e-retailing sector is also challenging bricks and mortar stores.

This week Max Brenner announced it was going into voluntary administration, citing “escalating costs and tighter retail trade”.

Looking at yesterday’s data, South Australian spending increased by 0.8 per cent, the biggest rise in the nation, while spending in Tasmania was also robust, up 0.6 per cent, ahead of NSW which rose 0.5 per cent. Spending in WA was flat, however, while the NT saw a 1.3 per cent drop.

Ms Hunter expects retail spending to continue on a course of relatively slow growth.

“It should still grow, but below historical averages as a result from the competition from e-retailing and pressure on households, which aren’t going to go away in the near future,” she said.