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Matthew Hassan, analyst at Westpac, points out that the Australia’s March retail report showed a slightly better than expected monthly gain but a materially weaker than expected result for March quarter sales volumes.

Key Quotes

“Monthly sales posted a 0.3% gain, beating expectations of a 0.2% rise with Feb’s surprisingly firm 0.8% gain marked up to a 0.9%. Annual growth lifted from 3.2%yr to 3.5%yr.”

“That’s where the good news ends though. The wash up for the quarter as a whole showed all of these gains in nominal sales were due to higher prices with sales volumes declining.”

“Real retail sales dipped 0.1% in Q1, coming in well below consensus expectations of a 0.3% gain with the quarter on a par with the flat result in Q4. Annual growth has slowed to 1.1%yr but with a cumulative gain of just 0.2% over the last three quarters is in danger of dropping below 1%yr next quarter.”

“The undershoot vs expectations was due to a stronger than expected rise in retail prices which rose, up +0.8%qtr vs +0.7%qtr in Q4. The sub-category detail shows a particularly big rise in food prices (+1.4%qtr vs 1.2% in Q4). Non food retail prices posted a 0.2%qtr gain.”

“Overall the March retail report points to downside risks to the wider consumer spending estimates in the March quarter GDP, the headwinds that emerged in the second half of last year clearly carrying into 2019.”