ACT retail spending hits record high
Job ads in ‘virus free’ regions at pre-COVID levels
Retail trade; Job advertisements
Retail trade: Retail trade fell by 4 per cent in August (consensus: -4.2 per cent) after rising by 3.2 per cent in July. Retail trade is up 7.1 per cent over the year.
Record retail trade: In the ACT, retail spending rose by 0.7 per cent in August to be up 15.1 per cent on a year ago. ACT retail sales hit record highs (since April 1982) of $594.2 million.
Job advertisements: According to SEEK, “In the fortnight ended 27 September 2020, job ad volumes across Australia were 80 per cent of pre-COVID levels. This is a continuation of the strong growth seen in August and is the highest national job ad figure since COVID began having an impact in March. South Australia and Western Australia have joined Tasmania and Northern Territory as having a higher number of jobs listed on seek.com.au than in February, surpassing pre-COVID levels.”
Retail trade data is important for consumer-focussed companies. The job advertisements data is a leading indicator of the job market and therefore important for consumer-focussed stocks and companies such as SEEK.
What does it all mean?
• The retail trade data is ‘old news’. The preliminary figures were issued on September 23 showing a 4.2 per cent decline in retail spending in August. The final numbers were moderately better, down 4 per cent. Melbourne’s level 4 virus restrictions resulted in a Victorian retail store shutdown rate of 87 per cent in August, according to Kepler Analytics. In response, retail spending in the south-eastern state slumped by 12.6 per cent during the month. Spending was down across all states and territories except the Northern Territory and ACT.
• Of course, this followed a period of solid national consumption with retail turnover hitting record highs of $30.7 billion in July. Spending had lifted for three successive months – including a record 16.9 per cent surge in sales in May – following a record plunge of 17.7 per cent during the April lockdown.
• The historic moves in retail trade during the pandemic have been complemented by big divergences across regions. Outside of Victoria, spending was just below record-high levels in August. In fact, spending in the nation’s capital hit all-time highs of $594.2 million. While government payments, super withdrawals and travel restrictions have broadly boosted consumer spending, states and territories that have contained the virus – with economic activity less restricted – have performed best.
• In August, Victoria’s lockdown dragged on nation-wide retail sales. Spending on clothing, footwear and personal accessory goods led declines (-10.5 per cent), followed by department stores (-8.9 per cent), cafes, restaurants and takeaway services (-6.6 per cent).
• While retail spending eased in August, there are big divergences across categories. While annual spending on electrical goods is up 21.9 per cent with liquor retailing up 31.4 per cent, spending at cafes, restaurants and catering services are down 28.6 per cent with newspaper and book retailing down 19.9 per cent.
What do the figures show?
Retail trade – August
• Retail trade fell by 4 per cent in August after rising by 3.2 per cent in July. Retail trade is up 7.1 per cent over the year.
• Totally enumerated sector trade (large retailers and chain stores) fell by 3.2 per cent in August but was still up 11.6 per cent from a year ago.
• Non-food retailing fell by 4.7 per cent in August after rising 4.6 per cent in July. Sales are up 9.9 per cent on a year ago after being up 17.1 per cent in the year to July.
The Australian Bureau of Statistics (ABS) wrote:
• “Victoria, which faced Stage 3 and 4 restrictions in August, fell 12.6 per cent in seasonally adjusted terms.”
• There were also falls in New South Wales (-2.0 per cent), Queensland (-1.1 per cent), South Australia (-0.9 per cent), Western Australia (-0.4 per cent), and Tasmania (-0.2 per cent). The Northern Territory (2.0 per cent), and the Australian Capital Territory (0.7 per cent) rose in seasonally adjusted terms in August 2020.
• All industries fell in August, as trading restrictions in Victoria drove falls at a national level. Household goods retailing (-6.0 per cent), other retailing (-5.1 per cent), clothing, footwear and personal accessory retailing (-10.5 per cent), cafes, restaurants and takeaway food services (-6.6 per cent), and department stores (-8.9 per cent) saw large falls. Food retailing (-0.2 per cent) saw a minor fall.
• While retail turnover has experienced volatility in monthly movements since March 2020, monthly levels being recorded over the last three months are well above levels of a year ago. Retail rose 7.1 per cent compared to August 2019, with food retailing, household goods retailing, and other retailing, particularly strong in through-the-year terms.
• Online sales made up 11.0 per cent of total retail turnover in original terms in August 2020, compared to 9.8 per cent in July. In August 2019, online retail turnover contributed 6.4 per cent to total retail.”
The Australian Bureau of Statistics (ABS) wrote on Supermarkets:
• “Turnover fell for Non-perishable goods (-0.5 per cent), and rose for Perishable goods (1.6 per cent) and All other products (0.1 per cent) in August 2020 compared to July 2020, in original terms.
• Retail turnover for all three categories continue to remain at higher levels when compared to August 2019. Annually, Perishable goods rose 14.0 per cent, Non-perishable goods 12.5 per cent, and All other products 11.1 per cent. The higher levels of revenue reflect a continuation of more food being prepared and consumed at home due to social distancing.”
The Australian Bureau of Statistics (ABS) wrote on online sales:
• “The total online series rose 7.0 per cent in seasonally adjusted month-on-month terms in August 2020, following a rise of 6.3 per cent in July, and a fall of 2.5 per cent in June 2020.
• These results followed large rises in March and April 2020, as consumers turned to online shopping as a way of complying with regulations introduced to encourage social distancing. Stage 3 and 4 restrictions in Victoria saw closures of stores in August, especially in Melbourne, and this has led to a further rise in online sales.”
Food and Non-food
• “August saw the largest rise since April, as restrictions in Victoria saw physical stores close in Melbourne, and retailers and customers again focused on online retailing. Unlike April, stores remained open across the rest of the country, so the rise of 7.0 per cent is well below the 27.1 per cent monthly rise recorded in April 2020.
• The seasonally adjusted level of online sales for the Food group rose 6.8 per cent in August, while Non-Food saw a 7.0 per cent rise from July to August.
• As a proportion of total grouped industry turnover, Non-food online sales were 17.6 per cent of total Non-food sales in August 2020, in original terms. This remains elevated compared to pre-COVID-19 levels but is down on the heights seen in April (20.5 per cent). While online sales as a proportion of total Non-food sales would have seen a large rise in Victoria, sales in other states continued to return to more established patterns.
• The proportion of total Food sales made online saw a small rise to 5.8 per cent in August. Food online sales made up 5.2 per cent of total Food sales in July. The proportion of Food sales in March was 3.1 per cent.
• Total online sales remain elevated at 11.0 per cent of total sales in August. This is a slight fall from the peak of 11.1 per cent in April 2020, when restrictions were in place across the whole country.”
SEEK job advertisements – Fortnight ended September 27, 2020
• According to SEEK, “Job ads in the last fortnight are at 80 per cent of pre-COVID levels.
• Job ad volumes continue to recover in most states and territories with South Australia, Western Australia, Tasmania and Northern Territory all passing pre-COVID levels.
• Job ads in Victoria are improving and now at 56 per cent of pre-COVID levels, approaching the highest levels we have seen since the pandemic began (compares to 51 per cent in previous fortnight).
• Professional Service roles are showing 55 per cent more applications per ad than this time last year.”
What is the importance of the economic data?
• The Bureau of Statistics’ Retail trade publication contains the most current readings on the performance of consumer spending. The ABS surveys 500 ‘larger businesses’ and 2,750 ‘smaller businesses’. Retail trade covers spending at a broad range of retail outlets but excludes both petrol and motor vehicle sales. A weak retail trade result may point to a slowing economy as well weighing on the share prices of listed retail stocks. But retail trade estimates can’t be assessed in isolation – it is important to look at the influences determining future trends in consumer spending, such as income, employment and confidence levels.
• The SEEK Job Advertisements release is a leading employment indicator. Employers only seek additional staff if business activity is strong, and more importantly, if they expect that conditions will remain favourable in coming months. It takes around 5-6 months for the new staff to be added to the payrolls. But a fall in job advertisements would have a more immediate impact on monthly employment estimates.
What are the implications for investors?
• The Commonwealth Bank’s (CBA) more timely credit and debit card spending data has stabilised at positive levels – to be up 4.5 per cent on average – in September (four weeks to September 25) when compared to a year ago. And consumer confidence lifted during the month.
• That said, a considerable amount of uncertainty persists around the consumer outlook – especially in Victoria – until the virus is supressed, state borders are re-opened, unemployment eases and a sustained post-pandemic fiscal response is announced in next week’s federal budget.
Published by Ryan Felsman, Senior Economist, CommSec