Retail sales strength not all that it seems

On the face of it, the June quarter retail sales data was unquestionably very strong, showing a surprise 1.4% rise in volumes.

In dollar terms, retail sales for June were up 12% from June 2021, reflecting the surge in prices from March onwards caused by the impact of the floods and rain, supply chain problems, higher energy costs and other prices for both imported and local goods, and price rises from suppliers for no reason other than it was an opportune moment.

ABS head of retail statistics Ben Dorber said in Wednesday’s release, “Sales volumes continued to rise into the June quarter, despite the largest rises in retail prices since the introduction of the GST in 2000, with price rises of 1.7 per cent in June and 1.8 per cent in March.”

But when you look a little more deeply into the data and the ABS’s analysis you find that it was not such a solid performance for the quarter after all.

The ABS said that volumes were only up 5.5% in the year to June this year from 12 months ago, meaning prices drove sales up 6.5% in the same period, or slightly faster than the Consumer Price Index rise of 6.1%.

In fact there seems to have been a bounce back affect from the impact of early lockdowns that lingered longer for cafes, restaurants, and takeaways, department stores and clothing footwear and personal accessories (think Lovisa products for example).

As Mr Dorber pointed out “The top three retail industries in the June quarter were all hit hard during lockdowns. Since the end of the Delta lockdowns, they have all continued to recover quickly, as they have returned to more usual trading conditions.”

Much of the growth in the June quarter sales volumes came from cafes, restaurants, and takeaway foods services, which rose 8.6% over the quarter and continued their post-lockdown resurgence.

Strong rises in sales volumes were also seen in clothing, footwear and personal accessory retailing (up 3.9%) and department stores (up 3.0%), while the other retailing sales sector saw volumes rise for the eighth consecutive quarter, up 1.2% in June.

But sales fell in two core retailing sectors – household goods and food. Food retailing is the most important sector in retailing, accounting for more than 38% of monthly turnover.

And for the third quarter in succession, food retailing volumes weakened, down 0.8% in June as the higher prices for fresh food, fruit, vegetables, milk and meat took a toll on consumer spending and demand.

Household goods retailing recording the largest fall, down 1.8% in volume terms after a 1.0% fall in March. This sector covers consumer electronics such as TV, mobiles and computers.

“Cost of living pressures and increasing interest rates appear to be weighing more on sales volumes for household goods retailing, the industry where most high-priced discretionary items are sold,” Mr Dorber explained in the statement.

In terms of regional performance, the ABS said there was underlying strength in volumes across the country with rises in six of the states and territories. Queensland had the largest rise, up 2.4%.

The core retailing states – NSW (up 1.1%) and Victoria (up 1.2%) – saw solid rises.

Interesting June online sales went nowhere, according to the ABS data.

Total online retailing sales were $3.635 billion in June, seasonally adjusted.

That was an all but unchanged figure in June of an estimated $1 million after the 1% or $37 million fall in May.

“This month’s unchanged result highlights the post pandemic shift in popularity towards online shopping as there were no restrictions impacting on bricks 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 ($330.6 million) through-the-year, in seasonally adjusted terms, the ABS said.