NSW reopening boosts October retail spending

Summary: Retail sales up 4.9% in October, greater than 2.5% expected; up 5.2% on annual basis; increase led by NSW sales, up 13.3%; largest influence on month from clothing.

Growth figures of domestic retail sales have been declining since 2014 and they reached a low-point in September 2017 when they registered an annual growth rate of just 1.5%. They then began increasing for about a year, only to stabilise at around 3.0% to 3.5% through late 2018 before trending lower through 2019 and early 2020. Monthly changes have been exceptionally volatile since then.

According to the latest ABS figures, total retail sales increased by 4.9% in October on a seasonally-adjusted basis. The gain was greater than the 2.5% increase as well as September’s 1.3% rise. On an annual basis, retail sales increased by 5.2%, up from September’s comparable figure of 1.7%.

“Growth was led by a phenomenal 13.3% rebound in New South Wales where sales were just 0.2% below their pre-delta level in May. That is despite many restrictions still in place through the first half of the month; the reopening rebound [has been] both stronger and earlier than expected,” said Westpac senior economist Matthew Hassan.

Commonwealth bond yields dropped significantly on the day as investors moved to lower-risk assets following reports of the spread of a more infectious strain of SARS-COVID 2 in South Africa. By the end of the day, the 3-year ACGB yield had shed 12bps to 1.10%, the 10-year rate had lost 14bps to 1.75% while the 20-year yield finished 13bps lower at 2.25%.

Retail sales are typically segmented into six categories (see below), with the “food” segment accounting for nearly 45% of total sales. However, the largest influence on the total during the month came from the “Clothing” segment which increased by 27.7% over the month and thus contributed 1.6 percentage points of the 4.9% increase. Food sales fell by 0.5% over the month and deducted 0.2 percentage points.

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