August sales volumes decline, albeit by less than expected
Retail sales volumes declined by 0.5% y/y in August, although at a slower pace compared to the upwardly revised decline of 1.0% in the previous month (revised from -1.8%). This outcome was better than the Reuters consensus expectation of -1.0%, but still marks an eighth consecutive month of annual decline in volume sales this year. On a month-on-month basis, however, seasonally adjusted volumes increased by 0.2%, following a 0.4% increase in July (revised up from 0.0%). At this stage, these outcomes suggest that the Retail industry will contribute positively to the 3Q23 quarterly GDP growth. Nevertheless, the year-to-date volumes are still 1.8% lower, compared to the same period last year, underscoring the challenging consumer backdrop.
Retail sales outlet performance
Four out of seven categories recorded a decline in annual volumes. The largest declines were recorded among General dealers (-3.8% y/y, contributing -1.7ppts) and Hardware material (-5.0% y/y, -0.4ppts). Household furniture and Pharmaceutical retailers declined by 1.6% and 1.2% respectively, each detracting 0.1ppts from the headline number. On the opposite end, a stronger performance by Clothing and footwear retailers persisted, with 11.3% y/y growth in volumes, contributing 1.7ppts, supported by Food and beverages retailers with 0.7%, and 0.1ppts contribution. Other retailers grew by 0.5%, contributing 0.1 ppts to the headline number.
Outlook
Credit data suggests that demand and supply for consumption credit, especially credit cards, remains strong, both in the bank and non-bank sectors. In addition, anecdotal evidence suggests that real wage growth might be turning marginally positive, for the first time since 2H21, largely due to slower inflation. If sustained, these could provide marginal support to shopping activity in the near term. However, these are counteracted by our expectation of a further tightening in lending standards, as the cumulative impact of past interest rate decisions filters through, as well as depressed consumer sentiment. As such, we maintain our view of subdued growth in household consumption expenditure for the remainder of the year.
