Australian Bureau of Statistics Retail Trade figures released today show that Australian retail turnover rose 0.4% in July 2014, seasonally adjusted, following a rise of 0.6% in June 2014.
The largest contributor to the rise was cafes, restaurants and takeaway food services (1.4%) followed by food retailing (0.5%), department stores (1.9%) and clothing, footwear and personal accessory retailing (0.1%). These were partially offset by falls in other retailing (-0.6%) and household goods retailing (-0.2%).
In seasonally adjusted terms the state which made the largest contribution to this rise was New South Wales (0.7%) followed by Victoria (0.6%), the Australian Capital Territory (2.6%), South Australia (0.4%) and Queensland (0.1%). These rises were partially offset by falls in the Northern Territory (-2.3%), Western Australia (-0.1%) and Tasmania (-0.4%).
The trend estimate for Australian turnover rose 0.1% in July 2014 following a rise of 0.2% in June 2014.
The ABS data is the latest in a string of positive economic indicators.
On 2 September the Reserve Bank of Australia’s (RBA) announced its decision to leave the cash rate unchanged at 2.5%. RBA governor Glenn Stevens said, “Financial conditions overall remain very accommodative. Long-term interest rates and risk spreads remain very low. Volatility in many financial prices is currently unusually low. Markets appear to be attaching a very low probability to any rise in global interest rates or other adverse event over the period ahead”.
Commenting on the RBA decision, Australian National Retailers Association (ANRA) CEO Margy Osmond said, “There’s no doubt the retail sector is benefitting from the current period of steady interest rates – which is assisting a much-needed boost in confidence”.
The Australian Retailers Association (ARA) response to the RBA’s announcement was more subdued with ARA Executive Director Russell Zimmerman stressing that consumer confidence remains extremely fragile despite a recent uplift in recent retail sales. “With the festive season right around the corner, retailers are beginning to invest in new marketing strategies and have also begun hiring Christmas casuals. The cost of doing business is increasing daily. Now is the time for the RBA to lower interest rates and aid retail growth,” Mr Zimmerman said.
According to the RBA while growth is expected to be a little below trend over the year ahead, recent data indicates gradually improving business conditions, some recovery in household sentiment and moderate economic growth. Despite a recent increase in the unemployment rate the RBA reports that most other indicators for the labour market show some improvement. Growth in wages has declined and is expected to be relatively modest. The RBA expects inflation to be consistent with its targeted rate of 2–3% over the next two years.
Dun & Bradstreet’s latest Business Earnings Survey forecasts that the final three months of the year should see business earnings return to pre-GFC highs on the back of sustained levels of optimism and healthy sales forecasts, with retailers particularly upbeat about increasing their profits.
Dun & Bradstreet’s profits expectations index has lifted to 29.1 points, up from 19.9 in the last quarter and 21.1 last year. With 40% of businesses anticipating higher profits during Q4 2014, compared to 11% that expect a weaker return and 49% that anticipate flat results, the index is now edging its 10-year high of 29.7 points.
Stephen Koukoulas, Economic Adviser to D&B, says “Not only are expected sales at an 11-year high; a sign of buoyant activity, but expected profits are at a level well above the long run average. In the past, firms have only held this level of optimism when the underlying economic conditions were strong.
“D&B’s data suggest that the economy is poised to run at – or even above – trend levels in the second half of 2014, with expected employment and capital expenditure also well above the long run average.”