Retail sales post biggest fall since March 2013, plunging 0.6pc in August

Updated

Retail sales have posted their biggest fall in about four-and-a-half years, plunging 0.6 per cent in August.

Key points: Retail turnover dropped 0.6pc in August

Among the biggest falls was a 1.8 per cent decline in cafe and restaurant turnover

Sales fell in every state and territory across the country

The steep decline was far worse than typical economist expectations of a 0.3 per cent rise and, in a double blow, the previous month's flat figure was revised down to a 0.2 per cent slide.

Turnover was also weak across the nation, with one of the nation's strongest economies, Victoria, leading the decline with a 0.8 per cent drop.

Sales in Queensland and the ACT also fell 0.8 per cent, Tasmania and the NT 0.7 per cent, South Australia and Western Australia 0.6 per cent, while New South Wales proved the most resilient state with a 0.2 per cent decline.

The slide in turnover was also widespread across the major retail sectors.

The large and generally stable food retailing category dropped 0.6 per cent, with steep falls in liquor and specialty retailing and an unusually large 0.5 per cent drop in supermarket sales.

The until-recently booming cafe, restaurant and catering sector suffered a 1.8 per cent plunge in turnover during August, seasonally adjusted, with takeaway food sales also slipping half a per cent.

The also until-recently booming households goods sector also endured a steep decline in sales during the last month of winter, with electrical and electronic goods (-1.6 per cent) and hardware, garden and building supplies (-1.1 per cent) the hardest hit.

Footwear and personal accessory sales also dragged the overall result, falling 0.6 per cent, although clothing sales edged up 0.1 per cent.

Department stores also bucked the August weakness, with sales up 0.7 per cent, although the trend continues to be deeply negative in this sector with sales having plunged 2.6 per cent in July.

Weak wages growth, rising close wallets

The Asia-Pacific economist for jobs website Indeed, Callam Pickering, said the July and August figures highlight the fragility of Australia's domestic economy.

"We don't believe that we are facing a retail recession but it is a timely reminder that retail conditions rarely stay strong for long unless they are driven by wage or salary growth," he wrote in a note.

"Lack of wage growth and high household debt have created a difficult retail environment and that will continue to contain retail sector growth over the next few years."

Paul Dales from Capital Economics said the weak sales data is likely to weigh on economic growth figures for the September quarter.

"While we are wary about reading too much into a single month's result, August's disappointing figures do tally with other data on the health of the household sector, such as the slump in car sales in recent months," he wrote.

"The weakness in retail sales supports our long-held view that a slowdown in consumption growth is one reason why the RBA won't raise interest rates at all next year."

The Australian dollar dropped from 78.5 US cents to around 78.3 on the data, even though trade figures released at the same time showed Australia had a bigger-than-expected $989 million surplus.

Topics: retail, economic-trends, business-economics-and-finance, australia

First posted