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Sales down, savings up

The latest ABS retail data tells a bleak story for the sector over August – when the majority of Australian consumers were locked down and their dollars had little place to go.

Over August, total retail sales fell by 1.7%, following a national 2.7% decline in July and a 1.8% decline in June. Clothing, footwear and personal accessory retailing and department stores were hit the hardest, with two consecutive months of double-digit negative sales growth – falling 15.7% and 10.2% respectively. 

Chart 1: Retail sales values, monthly change, seasonally adjusted

Source: ABS Retail Trade

As a result, we already know the story for the next data release covering September, when most of New South Wales, Victoria and the ACT remained locked down.

But there is also some hope in sight with the recent surge in vaccinations, particularly in those jurisdictions that have been locked down. Each of New South Wales, Victoria and the ACT finally have a ‘freedom day’ in sight, and many households are already planning on how they will use their stock of savings.

Indeed, the latest data released by APRA indicates households are likely to have a hefty pool of savings to spend when restrictions ease. Once again, household deposits have jumped during the current lockdown, continuing a familiar story since the onset of the pandemic.

Chart 2: Household deposits, monthly change, $m, seasonally adjusted

Source: APRA Monthly Authorised Deposit-taking Institution Statistics

Last year, restrictions on movement and a collapse in confidence saw households rein in discretionary purchases.  Added to that, generous government supports such as JobKeeper and the doubling of JobSeeker saw the incomes of some families rise.  Combined, these factors lifted the household saving rate to a record high of 22% in June 2020.

Savings are again surging in this current lockdown. In part, this reflects the same drivers as last year – confidence is down (though not nearly as much) and many businesses have had to temporarily shut their doors. Government supports are also up. The COVID Disaster Payment has already injected $9.1b into the economy, and new state payments have also added at least $12b.

Chart 3: Government supports, monthly, $b

Source: Deloitte Access Economics

While the mishmash of state/federal supports is certainly less encompassing than earlier JobKeeper supports, there are still a lot of dollars attached to them. And that sets the scene for a promising recovery as restrictions ease.

Just as they did through 2020, we can expect households to draw down some of these excess savings when cafés, bars, clubs and restaurants throw open their doors in the very near future.