Daily Commentary BY THE CURVE TEAM –

Retail Levels Out

8th of February, 2021

Retail sales for Q4 shows a more mixed view on sales.

Consumer spending on retail, not services, has held up the economy since covid began. For Q4, sales were up 2.5% in real terms and 6.4% for the year.

Previously a very stable data point, retail sales has been volatile since surging at the start of the pandemic. December was another example of this, with sales declining 4.2% for the month as lockdowns were reimposed and bumper November numbers couldn’t be sustained.

Uncertainty with lockdowns has been a downside risk on sales. On the other hand, increasing incomes from government support and less opportunity to spend on services has been an upside for sales.

Over this year, the volatility will likely continue. States are still vulnerable to lockdowns, as Western Australia showed last week.

Government support for income will likely dwindle as well, with JobKeeper payments ending after June. There’s also the possibility towards the end of the year that the covid risk is mitigated, which could see consumers switch their spending to services.

This week, the business survey for January is released on Tuesday. On Wednesday, consumer confidence for February is released.

Josh Stewart

Associate - Money Markets