Victoria lockdown only smudge on horizon as retail spending continues growth

Retail sales rose in April as consumers shrugged off the end of JobKeeper and splurged on coffee, eating out and takeaways.

Retail spending rose 1.1 per cent in April, in line with expectations. Picture: Josie Hayden

Retail sales rose in April as consumers shrugged off the end of JobKeeper and splurged on coffee, eating out and takeaways, but the Victorian lockdown has muddied the near-term outlook, analysts have warned.

Australian retail sales grew a seasonally adjusted 1.1 per cent in April, unchanged from a 1.1 per cent rise in March and in line with market expectations, according to the Australian Bureau of Statistics.

Growth was led by the cafe, restaurant and takeaway sector, which enjoyed a 2.3 per cent rise in spending.

Spending on cafes and restaurants is now 4.8 per cent above pre-pandemic levels, highlighting a swing back toward services consumption, NAB economist Tapas Strickland said.

The big uncertainty is whether spending on goods, which is now 12.8 per cent above pre-pandemic levels, starts to normalise over the coming months, he warned.

April also saw a swing back to in-store purchases, with online sales declining 3.7 per cent month-on-month and physical sales rising 1.4 per cent month-on-month.

While April marked a reprieve from lockdowns in most states, May and June will see fresh turbulence following Victoria’s move into a longer 14-day lockdown, Westpac’s Matthew Hassan warned.

“For retail, the timing of this impact is likely to fall more heavily into June than May, particularly given the tendency for a lift in ‘stockpiling’ expenditure leading into lockdowns, which will provide some initial lift to segments like basic food,” he said.

But the household saving rate remains elevated, at 11.6 per cent of disposable income, and should continue to support both goods and services consumption through the rest of the year, JP Morgan’s Tom Kennedy said.

On Wednesday, the national accounts showed Australia’s economy is now larger than it was before Covid-19 hit, with GDP rising 1.8 per cent over the first quarter of the calendar year.

The data also showed the household savings rate had declined only marginally from the prior quarter’s 12.2 per cent, with tens of billions of dollars accrued through the pandemic still sitting in savings.

These savings will support retail spending in the near term, Citi analysts said.

“The outlook for retail is positive as income growth recovers, savings remain elevated and international borders remain closed.

“We continue to expect calendar year 2021 retail sales growth of around 2 to 3 per cent. We are most positive on retailers with an exposure to the housing cycle where we see supportive fundamentals,” they said.