• Australian retail sales rebounded in April, helped in part by warmer weather encouraging people to eat out.
• Spending at cafes, restaurants and takeaway food outlets jumped by the highest level since October last year, masking sharp declines in apparel and department store sales.
• Annual growth slowed to 2.6% with strength in Victoria helping to offset weaker results in other parts of the country.

Australian retail sales rebounded in April, helped in part by warmer weather encouraging people to eat out.

According to the Australian Bureau of Statistics (ABS), sales rose by 0.4% to $26.56 billion in seasonally adjusted terms, topping forecasts for an increase of 0.3%.

The result was an improvement on March when retail sales were flat.

“Cafes, restaurants and takeaways (1.3%) led the rises” said Ben James, Director of Quarterly Economy Wide Surveys at the ABS.

The monthly increase was the largest in percentage terms since October last year, and reversed a 0.8% decline in March.

James said sales also rose in all other non-clothing categories during the month.

“There were also rises in other retailing (0.9%), food retailing (0.3%) and household goods retailing (0.7%), partially offset by falls in clothing, footwear and personal accessories (0.8%) and department stores (0.9%).”

James said the divergent performance may have been due to a warmer-than-usual weather conditions in many parts of the country.

“While industries including cafes, restaurants and takeaways can benefit from warm weather, there were likely negative impacts for some businesses in clothing, footwear and personal accessories and department stores,” he said.

Excluding food sales, the ABS said turnover rose by 0.5%, largely reversing a 0.6% decline in March.

Sales ex-food are seen by some as a better guide on discretionary spending levels across the retail sector.

The ABS said sales grew in most states and territories, led by a strong increase in New South Wales, Australia’s most populous state.

“There were rises in New South Wales (0.7%), Victoria (0.3%), Western Australia (0.7%), Queensland (0.1%), the Northern Territory (2.6%), Tasmania (0.9%) and the Australian Capital Territory (0.6%),” it said.

South Australia bucked the broader trend with sales slipping -0.6% from March.

The strength in New South Wales and Victoria suggests recent declines in property prices have yet to impact household spending levels, at least in retail outlets.

However, despite the rebound in April, annual growth in sales slowed, falling to 2.6% from 3.2% in the 12 months to March.

The sharp deceleration in the annual rate reflects that sales grew by a chunky 1% in April last year, below the 0.4% increase seen in the latest survey.

Over the same period, sales ex-food grew by 2.1%, down from 2.4% in the year to March.

Despite the small upside beat in April, not everyone is convinced the recovery will be sustained in the months ahead, be it for retail sales or broader household consumption.

“With household finances still under pressure from low wage growth, rising petrol prices and a slowing housing market, we expect the annual rate of consumption growth to slow from about 3.0% in the first quarter to around 2.0% by the end of the year,” said Kate Hickie, Australia and New Zealand Economist at Capital Economics.

Callam Pickering, APAC Economist at Indeed, shares a similar view.

“Underlying conditions remain weak,” he said following the release of the report.

“Household budgets are tight, compounded by low wage growth and high debt burdens, which has left many households reluctant to buy anything except the essentials.”

Along with slower annual growth in non-discretionary areas, Pickering says much of the national increase over the past year has come from just one state: Victoria, where population is increasing faster than other parts of the country.

“It’s also become clear that retail growth has become quite concentrated,” he says.

“Annual trend growth in Victoria is close to 5%, supported by very strong population growth, but growth outside Victoria is just 1.9%.”

Pickering says conditions Australia’s mining states, Queensland and Western Australia, are “particularly weak” at present.

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