Daily Commentary BY THE CURVE TEAM –

Data Disappointments Continue

7th of May, 2020

The past 24 hours of data has seen more disappointment.

As was flagged by the more timely data releases by the ABS, retail sales surged during March thanks to panic buying ahead of the lockdown. Sales jumped 8.5% for the month with food retailing accounting for most of the gains. Most other sectors suffered heavy falls which included dining out/takeaway, clothing and department store sales.

Expectations that the jump in sales for March would help boost first quarter GDP were squashed with the quarterly sales data also released yesterday. Retails sales for the quarter excluding inflation only rose 0.7% against expectations of a 1.8% rise. It highlights that the growth sales volumes for the quarter remained subdued despite the surge in March sales values.

April is set to be much worse for consumption, with the latest services PMI falling even further. After hovering below 50 from December to February, pointing to a contraction in the services sector, the index dropped to 38.7 in March. It has fallen further in April, hitting 27.1, a new low since the data began in the early 2000s.

Offshore the data wasn’t much better. The private ADP employment report in the US showed that more than 20 million jobs were lost last month in the US. The report is a good leading indicator for the official jobs report which is due out Friday night. The magnitude of the losses comes as no surprise given they have been flagged in the weekly data. The question will be how many jobs come back as the US economy starts to reopen.

David Flanagan

Director - Interest Rate Markets