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Uncertainty Around Friday’s Real Retail Sales Data

AUSTRALIA DATA

On Friday retail sales excluding inflation are published for Q3. This data reading should give us an idea if the strength in nominal retail sales is just higher prices or is underlying strength. Given the RBA’s close monitoring of the household sector to gauge the impact its tightening has had so far, the answer to this is important.

  • Economists are expecting retail sales ex inflation to rise 0.4% q/q but there is considerable uncertainty with forecasts ranging from flat to +1.7% q/q. It rose 1.4% q/q and 5.5% y/y in Q2.
  • Nominal sales rose 2.3% q/q in Q3 and the quarterly CPI and trimmed mean 1.8%. If we use the new monthly inflation data to deflate retail sales, then the projections are almost as diverse as those of analysts.
  • If retail sales are deflated by the monthly headline CPI, then Q3 real retail sales rose 0.5% q/q, close to consensus. Using the trimmed mean measure of inflation, then they rose 0.8% q/q.
  • The CPI includes services prices as well and they have tended to be lower on an annual basis than goods prices. We have taken out the categories which are obviously services to create a proxy for retail prices (RPI) and this series usually exceeds headline CPI. If we use this RPI proxy to deflate retail sales then it fell 0.1% q/q in Q3.
Australia real retail sales estimates using monthly CPI data y/y%

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On Friday retail sales excluding inflation are published for Q3. This data reading should give us an idea if the strength in nominal retail sales is just higher prices or is underlying strength. Given the RBA’s close monitoring of the household sector to gauge the impact its tightening has had so far, the answer to this is important.

  • Economists are expecting retail sales ex inflation to rise 0.4% q/q but there is considerable uncertainty with forecasts ranging from flat to +1.7% q/q. It rose 1.4% q/q and 5.5% y/y in Q2.
  • Nominal sales rose 2.3% q/q in Q3 and the quarterly CPI and trimmed mean 1.8%. If we use the new monthly inflation data to deflate retail sales, then the projections are almost as diverse as those of analysts.
  • If retail sales are deflated by the monthly headline CPI, then Q3 real retail sales rose 0.5% q/q, close to consensus. Using the trimmed mean measure of inflation, then they rose 0.8% q/q.
  • The CPI includes services prices as well and they have tended to be lower on an annual basis than goods prices. We have taken out the categories which are obviously services to create a proxy for retail prices (RPI) and this series usually exceeds headline CPI. If we use this RPI proxy to deflate retail sales then it fell 0.1% q/q in Q3.
Australia real retail sales estimates using monthly CPI data y/y%

Keep reading...Show less