Retail sales have exceeded consensus estimates for a second month in a row, growing 0.6 per cent on a seasonally adjusted basis during May.
The ABS figures bring yearly growth to 3.8 per cent, buoying the retail sector after analysts had warned that a late Easter break skewed a one per cent surge in April.
Household Goods (5.11 per cent), Electrical (5.80 per cent) and Furniture (8.62 per cent) saw the largest year-on-year growth with many new electronic products launched to the public in late April.
Australian Retailers Association executive director Russell Zimmerman said the arrival of a winter cold-snap during May had a positive effect on sales, noting that June EOFY sales should provide the industry with a sales boost to round out a strong second quarter.
“As we enter the colder months we will see retail growth remain strong, giving retailers breathing room in the tough trading environment,” he said.
“We look forward to seeing consumers take advantage of the end of financial year sales in June giving retailers another boost in sales.”
Food retailing also slowed after the holidays to 0.1 per cent, but clothing footwear and personal accessories increased by 1.3 per cent. Cafes, restaurants and takeaway food services remained strong, growing by 0.6 per cent.
Citi economists said that strong household sales are likely tied to flow-through from a pick-up in housing churn some months ago, alongside employment gains over the last three months.
In the hours after the data was released the RBA, which has been keeping a close eye on consumer spending amid ailing fundamentals, decided to hold rates at 1.5 per cent for the 10th time in a row.
National Retailers Association CEO Dominique Lamb welcomed the decision to leave the official cash rate alone.
“Maintaining low interest rates over time will steadily see consumer confidence return to the sector and we do expect the market to pick up between now and Christmas,” she said.
However, UBS has warned that while April/May is a clear improvement in both seasonally adjusted and trend terms there are still substantial macro-headwinds weighing on consumers that are likely to constrict growth moving forward.
“It’s probable that some of the retail bounce is a short-term weather-related boost, as (mainly QLD) households re-stocked post Cyclone Debbie, and the recent bounce of retail also followed a sharp slowdown in prior months,” UBS economist George Tharenou said.
Citi also signalled a cooling in residential construction as a risk for ongoing gains in housing related expenditure.
Retail analyst Ben Gilbert outlined similar concerns in a report last week, downgrading earnings forecasts for a variety of publicly listed retailers.
YEAR-ON-YEAR RETAIL GROWTH (May 2016 – May 2017 seasonally adjusted)
Household goods retailing (5.11 per cent), Clothing, footwear and personal accessory retailing (3.76 per cent), Cafés, restaurants and takeaway food services (5.26 per cent), Other retailing (2.89 per cent), Food retailing (3.75 per cent) and Department stores (-0.32 per cent).
New South Wales (3.93 per cent), Victoria (5.19 per cent), South Australia (4.90 per cent), Western Australia (0.98 per cent), Tasmania (4.53 per cent), Australian Capital Territory (5.68 per cent), Queensland (3.07 per cent) and the Northern Territory (0.62 per cent).
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