The year we went out again

According to the Australian Bureau of Statistics (ABS), retail trade rose 0.2 per cent in June to be up 12 per cent on the year. In the June quarter, sales rose by 1.4 per cent in real (inflation-adjusted) terms to be up 5.5 per cent on the year.

Real (inflation-adjusted) spending at cafes and restaurants rebounded by 16.3 per cent in 2021/22 – the
fastest growth of any spending category.

Retail prices rose by 1.7 per cent in the June quarter, taking annual growth from 3.3 per cent to a 32-year high of 4.8 per cent (fastest pace since March quarter 1990).

According to the Federal Chamber of Automotive Industries (FCAI) a total of 84,461 vehicles were sold in July bringing the year-to-date total to 622,319. This result represents a 0.4 per cent increase on the same month in 2021.

The S&P Global Australia Services Purchasing Managers’ Index (PMI) eased from 52.6 in June to 50.9 points in July. Readings above 50 denote an expansion in activity. But business sentiment eased to 27-month lows.

What does it all mean?

Despite all the talk about a ‘cost of living crisis’, Aussie consumers are buying more goods and services. Excluding price changes, spending rose 1.4 per cent in the June quarter, ahead of the ‘normal’ or decade average quarterly lift of 0.7 per cent. Of the 15 detailed spending categories, real spending rose in nine over the June quarter, led by cafes and restaurants (up 10.3 per cent). In contrast, real spending at supermarkets fell 0.9 per cent and spending at specialty food outlets like bakeries and butchers fell by 4.3 per cent.

Over 2021/22 as a whole, again cafes and restaurants led the way with real spending up 16.3 per cent, while at the other end of the scale real spending on newspapers and books fell 12.2 per cent.

The year 2021/22 was the year that Aussies went out again. In both real and nominal terms, Aussies spent more at cafes and restaurants than ever before.

The industry body for the car industry, the FCAI, says that “Vehicle and component manufacturing operations remain affected by plant shutdowns caused by Covid-19. Logistics, including shipping, remain unpredictable. While small growth on the same month in 2021 is encouraging, we do not expect the supply of vehicles to Australia to stabilise in the near future.”

New vehicle sales are actually quite choppy. Sales are up over the year, led by sports utility vehicles and heavy commercial vehicles. Higher sales in NSW and South Australia slightly out-paced declines elsewhere. And over the calendar year to July, five of the top 10 marques sold more vehicles than a year earlier. And of interest, traditional sedans continue to be shunned – the annual total of passenger car sales hasn’t been lower in 43 years of records.

What do you need to know?
New vehicle sales – July

According to the Federal Chamber of Automotive Industries (FCAI) a total of 84,461 vehicles were sold in July, bringing the year-to-date total to 622,319. This result represents a 0.4 per cent increase on the same month in 2021.

Passenger car sales fell by 9.1 per cent in July 2022 compared to a year earlier; sales of sports utility vehicles (SUVs) rose by 6.4 per cent; light commercial vehicles were down by 4.4 per cent; but heavy commercial vehicles lifted 4.0 per cent on July 2021.

A total of 1,020,521 vehicles were sold across Australia over the 12 months to July, representing a 3.1 per cent decrease on the year to July 2021.

According to the FCAI: “Toyota led the market with a total of 19,565 vehicles sold. Mazda was next with 7,879 followed by Hyundai (6,792), Kia (6,711) and Mitsubishi (5,611).

The Toyota Hi-Lux was the highest selling model with 6,441 sales reported. The Ford Ranger followed with 2,934. Toyota’s RAV4 was next with 2,437 followed by Mazda’s CX5 (2,346) and Hyundai’s Tucson (2,186).”

Across states and territories sales in July 2022 versus July 2021: NSW +10.9 per cent; Victoria -5.8 per cent; Queensland -1.1 per cent; South Australia +13.3 per cent; Western Australia -9.0 per cent; Tasmania -13.2 per cent; Northern Territory -16.6 per cent; ACT -16.4 per cent. S&P Global Purchasing Managers’ Indexes (PMI) – July

The final S&P Global Australia Services Purchasing Managers’ Index (PMI) eased from 52.6 in June to a sixmonth low of 50.9 points in July. Readings above 50 denote an expansion in activity. But business sentiment eased to 27-month lows.

S&P Global Market Intelligence economists said, “Latest S&P Global PMI® data brought about mixed feelings regarding the current and future health of the Australian service sector. On one hand, the economy recorded a sixth month of overall expansion in business activity and new business. However, both increased at marginal rates that were the slowest in their respective sequences. With firms reporting that interest rate hikes and sustained inflationary pressures were dampening overall demand, July’s record high selling price inflation certainly presents itself as a further downside risk to sector health in the near future.

“Furthermore, staffing levels have continued to expand for an eleventh straight month in July, but firms are continuing to cite staff shortages and difficulties in hiring new workers. As a result, Australian service sector firms are beginning to raise wages to attract and maintain employees. Should firms pass on the additional costs to clients, we may see even higher output price inflation.”

Retail trade – June 2022

As reported by the ABS on July 28, retail trade rose 0.2 per cent in June to a record high, with sales up 12 per cent on a year earlier.

The ABS reported: “Total online retailing sales were $3,635.1 million in June 2022, in seasonally adjusted terms. Seasonally adjusted online sales were relatively unchanged at 0.0 per cent ($1.0m), following a fall of 1.0 per cent (-$37.1m). This month’s unchanged result highlights the post pandemic shift in popularity towards online shopping as there were no restrictions impacting on brick and mortar sales pushing consumers to online platforms. Whilst online sales are 14.4 per cent down on the Delta outbreak peak in September 2021, total online retailing sales remain elevated, up 10.0 per cent ($330.6m) through-the-year, in seasonally adjusted terms.

Spending by category in June: According to the ABS, “Cafes, restaurants, and takeaway food services had the largest rise, up 2.7 per cent, followed by clothing, footwear, and personal accessory retailing (up 1.3 per cent), and other retailing (up 0.5 per cent). Department stores saw the largest fall, down 3.7 per cent, followed by food retailing (down 0.3 per cent) and household goods retailing (down 0.3 per cent).”

By states/territories in June: According to the ABS, “Turnover rose in the Northern Territory (up 1.8 per cent), Queensland (up 0.7 per cent), the Australian Capital Territory (up 0.6 per cent), Western Australian up (0.5 per cent) and Tasmania (up 0.5 per cent). New South Wales was the only state or territory where turnover fell, down 0.2 per cent. Retail turnover was relatively unchanged in South Australia and Victoria (0.0 per cent).”

Retail trade – June quarter 2022

In the June quarter, retail trade rose by 1.4 per cent in real (inflation-adjusted) terms to be up 5.5 per cent on the year. Over the past decade retail trade volumes have risen on average by 0.7 per cent per quarter.

Real spending across states and territories: NSW (+1.1 per cent); Victoria (+1.2 per cent); Queensland (+2.4 per cent); South Australia (+1.3 per cent); Western Australia (+1.3 per cent); Tasmania (+2.0 per cent); NT (-0.2 per cent); ACT (flat).

In nominal terms, retail trade grew by 3.2 per cent in the quarter to be up 10.6 per cent on the year.

Retail prices rose by 1.7 per cent in the June quarter, taking annual growth from 3.3 per cent to a 32-year high of 4.8 per cent (fastest pace since March quarter 1990).

In the 2021/22 financial year, retail trade grew by 5.9 per cent with volumes up 2.9 per cent (retail inflation 3.0 per cent). The 2.9 per cent lift in volumes was slightly above the 2.7 per cent decade-average.

Originally published by Craig James, Chief Economist, CommSec