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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.”