Online retail sales contract in May

The NAB Online Retail Sales Index contracted again in May (-0.9 per cent) on a month-on-month basis, following on from a significantly revised contraction in April (-1.3 per cent).

NAB chief economist, Alan Oster, observes that apart from the omicron-induced spike in January, the monthly change has generally been negative since October. This coincided with the ending of lockdowns in the larger states, supporting the broader rebound in in-store retail sales.

In year-on-year terms, however, the NAB Online Retail Sales Index continued to grow and was up 10.4 per cent. But Oster says year-on-year growth is slowing.

By category, results were somewhat mixed in May. Department stores continued to grow and fashion returned to growth. Large sales category grocery and liquor, which recorded growth in April, contracted the most in May.

In year-on-year terms, for grocery and liquor, growth has remained in double digits, albeit slowing. The largest sales category, homewares and appliances, recorded a smaller contraction than the overall index, but in year-on-year terms, is one of the slowest after strong growth over the prior two years.

All states, except Queensland, recorded a contraction in growth in month-on-month terms in May, with the previous month’s growth leader, South Australia, contracting more than the average.

In year-on-year terms, ACT leads growth, with Queensland leading the larger sales states.

The contraction in growth deteriorated for regional areas in the month, while metro areas improved to record a smaller contraction. However, this headline result was influenced by a significant decline in South Australia regional sales in May, mostly reversing the gain for the same area in April.

In year-on-year terms, growth in metro areas was slightly faster, with NSW and Queensland contributing heavily to the result.

The contraction in growth was larger in May for international retailers, with domestic improving slightly, albeit still contracting. Fashion, department stores and personal and recreational goods contributed heavily to the monthly result for international sales. Over the year, domestic retailers continue to outpace international.

NAB estimates that in the 12 months to May, Australians spent $55.96 billion on online retail, a level that is around 14.7 per cent of the total retail trade estimate (April 2022, Australian Bureau of Statistics Series 8501,) and about 16.6 per cent higher than the 12 months to May 2021.

csuggest spending growth is beginning to soften,” says Oster.

“It is likely that inflationary pressures and concerns over the future direction of borrowing costs are beginning to weigh on the consumer.”

For online retail, looking beyond the monthly volatility, NAB has observed that department stores, grocery and liquor, and takeaway food made a strong contribution to the index in the past 12 months.

“These three categories make up about 40 per cent of the index but have contributed about 60 per cent of the growth over the past year,” says Oster.

“In contrast, largest sales share category, homewares and appliances, has contributed much less to growth than its proportion of the index, while other categories like fashion have been on par.”