Australian Retail Sales Show Slowing in July

Australian retail sales for the month of July has shown no growth as it flat lined for the first time since 5 months, this report reveals a strong deceleration in the Australian economy since the beginning of the third quarter. The Australian Bureau of Statistics reported on Thursday that retail sales came in unchanged for July after a 0.1% rise in the month of June. A median estimate of economists had earlier projected a 0.3% acceleration.

About 55% of Australia’s gross domestic product is made up of consumer spending, this was one of the reasons for the economy’s wonderful performance through the first quarter of 2016. Preliminary second quarter GDP figures from the Australian government are scheduled to be published next Wednesday. Despite analysts’ estimations that the economy will grow, there is a very high chance that its growth figures will come in below the 1.1% quarterly gain in March, this was the highest in 3 years.

The Australian Industry Group (AIG) reported that, “manufacturing activity slumped in August on the trail of a wide scale correction in the country’s food and beverage sub-sector. Production, employment, exports and sales all entered negative territory in August”.

China, Australia’s largest trading partner, reported an unexpected surge in manufacturing activity last month. The National Bureau of Statistics manufacturing PMI climbed from 49.9 to 50.4 in August on a scale where a reading above 50 signals growth. The expansion seen in August was the largest in almost 2 years, it raised subtle hope for stabilization in the world’s second largest economy.

Retail Sales in Australia posted their strongest growth in the Australian Capital Territory, where it grew by 1.2%, as South Australia, Tasmania and Queensland each grew by 0.5%, Western Australia added 0.3% and the Northern Territory posted a 0.4% growth. Declines were however posted in Victoria and New South Wales, who lost 0.6% and 0.2% respectively. As the 2 most populated states witnessed falls last month, the Westpac senior economist Matthew Hassan noted that they had generally been much stronger.

"Some of the 'mixed messages' from retail at the moment likely reflect widely diverging performances by state with consumers in the growth centres in the south-east boosting spend, but those in mining states cutting back," he wrote in a note.

Data elsewhere revealed in seasonally adjusted terms that, “there were rises in Queensland (0.5 per cent), South Australia (0.5 per cent), Western Australia (0.3 per cent), the Australian Capital Territory (1.2 per cent), Tasmania (0.5 per cent) and the Northern Territory (0.4 per cent)”.

There can be little argument that these are disappointing figures. The data suggests that assumptions about the strength of household consumption this financial year could prove overly optimistic. Australian stocks edged lower Friday morning and were on track for their fifth decline in the past six days. The S&P 500/ASX 200 Index was last down 0.3%. For the month of August, the index closed down 2.3%.