Wednesday, March 3, 2010

ABS Retail Sales for January 2010 Alert: Stimulus hangover persists in January $$

•ABS retail sales rose 2% in January 2010 on pcp, using original ABS data. The slowdown was expected as the retail sector continued to cycle the first round of stimulus. Hardware and Clothing categories experienced the largest declines. Citi’s Retail Sales Indicator of listed retail companies rose 1.5% in January 2010 compared to 3.4% in December 2009. This is below the broader retail sector.

Key points

• Supermarkets rose a modest 1.6% in January. While food inflation remains subdued, the weak result also reflects a step-down in volume growth. Eating out of home sales increased 8.7%.

• Department stores grew 1.2% in January, accelerating from the 3.2% decline in the prior month. Our feedback suggests that some of the improvement came as a result of strong clearance activity in January.

• Clothing sales declined 3.3%, continuing the slowdown from November 2009. We expect the pace of decline to accelerate over the next six months. Clothing specialties were the largest beneficiaries from the second round of fiscal stimulus.

•Electrical sales rose just 0.2% in January. Although, sales improved on the 6.4% decline in December 2009, the flat result is coming off a weak baseline.

• Furniture also slowed this month, with sales rising 3.4% compared to the 10.8% growth recorded in December 2009. The category has been supported by strong home purchase activity over the past 12 months.

• Hardware sales were down 3.3% in January 2010. However this is an improvement to December which was down 11%. The strong slowdown over the past two months indicates the large stimulus impact on this category.

Our view on retail spending

•The weak January 2010 retail sales data was expected as the retail sector cycled $8.8 billion in stimulus payments made in December 2008. The weakness reinforced our view that retailers will continue to face an even larger headwind over the next three months as they cycle a greater and more broad-based round of stimulus between March to May 2010.

ABS Retail Sales for January 2010

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