Slump in Australia retail sales in June clouds Q3 growth outlook

SYDNEY: Australian retail sales slumped in June as coronavirus lockdowns and mobility restrictions in much of the country hit demand, clouding the outlook for the third quarter as COVID-19 cases continue to rise.

Retail turnover in June fell 1.8 per cent from a month earlier, the biggest drop this year, preliminary figures from the Australian Bureau of Statistics (ABS) showed on Wednesday (Jul 21). That compared with a larger-than-expected 0.4 per cent gain in May and a median forecast for a 0.5 per cent drop.

"We expect retail sales to fall again in July as the Sydney lockdown intensifies, another Melbourne lockdown starts and South Australia also falls into lockdown," ANZ economists wrote in a note.

"As the risks of a long Sydney lockdown increase, so do the risks of a muted recovery, particularly since fiscal support is not as strong as it was during the long Melbourne lockdown in 2020."

Fears that current lockdowns across three of Australia's six states would extend sent the local dollar in a tailspin as it slipped for a fifth straight session to the lowest since November 2020.

The virus situation worsened on Wednesday with both Victoria state and Sydney reporting sharp increases in new COVID-19 cases even as more than half the country's population remained under stay-at-home orders. read more

READ: Shut off from the world, Australia fosters red-hot growth at home

A majority of economists are predicting Australia's A$2 trillion (US$1.5 trillion) economy will shrink in the third quarter, its first contraction since June 2020, while the country's central bank is seen reversing its taper decision in response to the current virus outbreak. read more

The slowdown in demand is already evidenced by weekly consumer confidence readings, with the latest report showing a 5.2 per cent slump last week, the biggest fall since March 2020 when the pandemic first hit.

Credit and debit card spending data from the Commonwealth Bank showed a 0.6 per cent drop in New South Wales, of which Sydney is the capital city, over the week ending Jul 16 versus 2019 levels. That compares with a 2.1 per cent lift in the prior week.

Wednesday's initial retail sales data showed Victoria led the falls in June with a 3.5 per cent drop as the hit from the state's fourth lockdown was more pronounced than in May. Sales declined 2 per cent in New South Wales, while Queensland was weaker too due to stay-at-home restrictions and reduced interstate mobility.

All industries except for food retailing declined in June. Cafes, restaurants and takeaway food services, and clothing, footwear and personal accessory retailing posted the largest falls.

Final retail sales figures will be released on Aug 4.