Coronavirus: Retail sales surge as shoppers roam free

Retail spending has roared back to life as the easing of COVID-19 restrictions returns customers faster than economists anticipated.

Shoppers at Broadway shopping centre in Sydney this week. Picture: Justin Lloyd.

Retail spending has roared back to life as the easing of COVID-19 restrictions returns customers to the nation’s cafes, shopping centres and showrooms faster than economists anticipated.

Retail sales in May surged 17 per cent compared with April, the highest increase on record, ­almost reversing the near 18 per cent plunge in April when retailing fell off a cliff during a nationwide lockdown to combat the coronavirus.

The Australian Retailers ­Association said the spending rise was an indication of pent-up ­demand by consumers who were forced into household lockdown during the peak of the pandemic.

Commonwealth Bank’s credit and debit card data also showed a pick-up in consumption, with spending on household goods for the week ending June 26 increasing 25 per cent compared with the same period last year.

National Australia Bank chief economist Alan Oster said his bank’s customer transaction data also indicated a powerful resurgence in retail spending, “much faster” than expected.

“March and April were catastrophic, May has improved a lot and June is sort of back to normal,” Mr Oster said. “Our data is doing a lot better than we thought it would. Consumption overall looks like it’s back near levels of January and February.”

New car sales have surged, including more than 110,000 in June — an 84 per cent increase on the near 60,000 sold in May.

Federal Chamber of Automotive Industries chief executive Tony Weber said: “The extension of the government’s instant asset write-off scheme has been a positive influence.”

ARA chief executive Paul Zahra said shops were enjoying an economic “sugar hit” that was likely to persist while retailers continued to advertise discounts. “What the figures tell us is that people want to shop and that is ­exciting,” he said.

Mr Zahra said JobKeeper payments and superannuation withdrawal requests were acting almost as stimulus measures and fuelling the hike in spending.

The solid retail figures follow a more optimistic outlook for the economy from the Reserve Bank and the International Monetary Fund, which have both upgraded growth outlooks for Australia over the past week.

UBS analysts have tipped that June retail figures will show further improvement but it will be more modest than in May, suggesting consumer spending has likely peaked.

“While they are encouraging after a torrid April, it’s far too early to say that the sector is out of the woods,” Mr Zahra said.

He said ongoing financial support by the federal government would be crucial to ensuring traders could stay open until the Christmas period.

“These figures show that the pandemic has left some categories much worse hit than others, with some retailers facing significant hurdles to recovery as well as a ­financial cliff when JobKeeper is due to end in September,” Mr Zahra said.

Clothing and footwear retailing jumped 129.2 per cent, while department stores posted a monthly increase of 44.4 per cent. Cafes, restaurants and takeaway services booked a month-on-month rise of 30.3 per cent.

Total food retailing in seasonally ­adjusted terms rose 7.2 per cent.

The ABS figures also revealed that online sales contributed to 10.1 per cent of total retail turnover in May, a 1 per cent drop compared with April.

“COVID-19 has accelerated many (online) trends that were already happening in the retail ­industry,” Mr Zahra said.

JB Hi-Fi said on June 11 that the onset of the pandemic had prompted a 20 per cent sales boost in the second half of the 2020 financial year, as customers sought entertainment products while stuck at home. Harvey Norman said sales increased 17.5 per cent at the end of May, prompting a special dividend.

Westpac senior economist Matthew Hassan said the economic shock induced by COVID-19 was bringing “wild” fluctuations in monthly retail growth rates, double the volatility experienced during the implementation of the goods and services tax in 2000.

“It’s nice to see that there is ­rebound but it is still going to be tough going over the second half of this year,” Mr Hassan said.

According to Westpac, retail sales are above pre-COVID-19 levels experienced in December last year. The ABS figures show that Western Australia had the largest increase in turnover volumes in May at 19.7 per cent, followed by Tasmania, which rose by 17.3 per cent.

Victoria experienced an ­increase of 17.2 per cent, while all other state and territory turnover rates were below the ­national ­average.