Retail sales rebounded strongly in November 2019, with retail turnover lifting by 0.9%. The rise in sales was well ahead of economists' expectations of 0.4% growth, and the strongest growth recorded in 2 years, according to the Australian Financial Review.
Increases across the board
Every state saw an increase in sales, with Victoria up 1.1%, NSW up 0.7%, Queensland up 1.2%, South Australia up 1.4%, Western Australia up 0.5% and Tasmania up 0.4%. Afterpay Ltd (ASX: APT) reported $1 billion in underlying sales in November, its best month since its launch.
Department store spending increased an impressive 3.4%, which will no doubt aid Myer Holdings Ltd (ASX: MYR) as it continues to execute on its turnaround plan. Sales of clothing, footwear and personal accessories increased by 3.1%, which will boost returns to retailers including Accent Group Ltd (ASX: AX1) and Lovisa Holdings Ltd (ASX: LOV). Spending on household goods increased by 1.2% benefitting retailers including JB Hi-Fi Limited (ASX: JBH), Kogan.com Ltd (ASX: KGN), and Harvey Norman Holdings Limited (ASX: HVN).
Retailers hoping for turning point
Retailers who suffered through a difficult 2019 will no doubt be hoping the rise in sales marks a turning point in consumer spending. Successive interest rate cuts and tax cuts last year did little to increase spending, with household consumption growing just 0.1% across the September quarter. It may, however, still be too early to call.
Increased spending in November could show consumers taking advantage of discounts to take care of their Christmas shopping early. If so, the rise in November sales would represent a shift in timing of purchases, rather than an overall increase in spending. In December 2018, retail sales fell, undermining most of the rise seen in November that year. December's figures will therefore be crucial in determining whether spending has increased overall.
2020 outlook
Consumer confidence fell in December and early 2020, as households continued to face low wage growth and the bushfires weighed on sentiment. The potential for a cut to official interest rates as early as next month has been mooted as a possible solution. The ASX retailers discussed above will no doubt welcome further interest rate reductions, which would leave consumers with more discretionary income to spend.
