Retail spending up 8% on last year: CommSec's Craig James

EXPERT OBSERVER

Interestingly, Australia’s policymakers say we are in recession. But clearly it is a very interesting recession. Retail spending rose 2.4 per cent in June after a 16.9 per cent rise in May. Overall, Australians spent 8.2 per cent more on retail goods and services than they did in June last year. Recent jobs data shows that a record 210,800 jobs were created in June. And national home prices are 7.8 per cent higher than a year ago.

There is no doubt that Australia – like other nations – is battling the COVID-19 crisis and the impacts on the economy. But today’s data shows that our economy is indeed doing better than most – as the Treasurer and Reserve Bank Governor have noted. Stimulus measures provided by state and territory governments and the Reserve Bank have been significant, helping businesses and consumers navigate these challenging times.

The June retail trade data is 22 days old, but it is almost ancient history. Melbourne is under lockdown and many NSW residents are in isolation due to virus outbreaks. Governments and banks have done a lot so far to support Aussies but more may still be required.

The services sector, including restaurants, pubs & clubs, sporting venues and arts & recreation continue to struggle. But food, alcohol and household goods remain very much in demand, driving the overall retail sector higher.

The road will be bumpy in the re-opening phase, and there will be setbacks, but the Australian economy is on the way back. We just need to rely on all Australians doing the right thing – social distancing, wearing masks when required and maintaining good hand hygiene.

What do the figures show?

Retail trade – June

‘Preliminary’ retail trade rose by 2.4 per cent in June after rising by a record 16.9 per cent in May (highest in 38 years of records). Retail spending is up 8.2 per cent on the year. The final June data will be released on August 4.

The ABS reported, “there were large increases in turnover in Cafes, restaurants and takeaway food services, and Clothing, footwear and personal accessory retailing. While some restrictions on trade remain, many businesses saw a full month of trade in June, having been closed for the first week of May 2020."

Rises in Cafes, restaurants and takeaway food services exceeded 20 per cent for the second consecutive month, but will remain 17 per cent below the levels of June 2019, while Clothing, footwear and personal accessory retailing rose around 19 per cent, remaining 6 per cent below June 2019 levels.

Food retailing rose 0.9 per cent following a 7.2 per cent month-on-month rise in May, and remains elevated in through-the-year terms.

Analysis of supermarket scanner data shows that compared to June 2019, Perishable goods rose 14.4 per cent, Non-perishable goods 12.4 per cent, and All other products 7.8 per cent. The annual growth reflects a continuation of more food being prepared and consumed at home due to social distancing. At the end of the June month there was some evidence of stockpiling of goods such as toilet paper, flour, rice and pasta. At the aggregate level, stockpiling is most evident in Victoria.

Household goods retailing fell in June 2020 although remains 23 per cent above June 2019 levels.

Department stores saw a significant fall after a large rise in May 2020 in seasonally adjusted month-on-month terms.”

In its press release the ABS said: “Rises in June 2020 were led by cafes, restaurants and takeaway food services, and clothing, footwear and personal accessory retailing. While some restrictions on trade remained in June, many businesses in these industries saw a full month of trade, having been closed for the first week of May 2020. Turnover in these industries remained below the levels of June 2019.

Food retailing saw a minor rise of 0.9 per cent, with a rise in supermarkets and grocery stores offset by a fall in liquor retailing. Levels in supermarkets and grocery stores remained elevated, with evidence of stockpiling occurring at the very end of June, particularly in Victoria.

Household goods retailing fell in June 2020, however this industry continued to trade significantly above the levels of June 2019. Department stores fell 12 per cent following a large rise in May.”

Skilled Job Vacancies – June

In seasonally adjusted terms, the Department of Employment Internet Vacancy Index (IVI) increased by 26.3 per cent (or 24,600 job advertisements) in June 2020 to stand at 118,300. Despite this increase, job advertisements are 31.0 per cent (or 53,100 advertisements) below the level recorded in June 2019.

All states and both territories recorded an increase in job advertisements in June 2020. NSW (up 22.5 per cent); Victoria (up 35.4 per cent); Queensland (up 29.3 per cent); South Australia (up 29.5 per cent); Western Australia (up 32.4 per cent); Tasmania (up 52.3 per cent); Northern Territory (up 35.7 per cent); ACT (up 3 per cent).

“Job advertisements increased in all occupational groups. The strongest gains were recorded for Community and Personal Service Workers (up by 54.5 per cent), followed by Sales Workers (39.2 per cent) and Technicians and Trades Workers (32.1 per cent).

Despite the gains observed during the month, 45 of the 48 detailed occupational groups recorded falls in job advertisement over the year to June 2020.

Education Professionals recorded the largest increase (up by 21.9 per cent or 390 job advertisements) over the year. Construction Trades Workers, and Cleaners and Laundry Workers were the two other occupational groups to record increases, both up by 3.9 per cent (or 80 and 60 job advertisements respectively).

Job advertisements for Education Professionals and Cleaners and Laundry Workers now exceed pre COVID-19 (February 2020) levels.”

What are the implications for investors

The economic environment remains very fluid, driven by daily developments in the virus crisis. Volatility will persist until a vaccine is found or there are fundamental advances in virus treatments.

The Federal Government will release the July Economic and Fiscal Update (JEFU) at 11am on Thursday.

CRAIG JAMES is the Chief Economist at CommSec