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Unclear if consumers will ‘snap back’ like previous reopenings with virus circulating

Our data mapping points to another retail sales fall in August. We see the official ABS measure falling 2.7% on a month-on-month basis. Retail sales fell 2.7% in July – we forecast a 3.3% drop at the time, since revised to -3.5%.

Ongoing lockdowns in New South Wales, Victoria and the ACT continue to be the key driver of weak retail sales. This is clearly a challenge for retail, in particular hospitality. With New South Wales and Victoria now having moved from case to vaccine targets, lockdowns are likely to ease from October and November. This is a challenge for coming months but presents some optimism ahead of Christmas. It remains unclear however, whether consumers will “snap back” to the same extent as previous reopenings with the virus circulating in the community this time

Our weekly consumer tracking data showed weakness all through August, but has been a little more encouraging in early September. We will publish these data fortnightly and they should give some advance indications for how retail is shaping up across the month.

NAB Chief Economist, Alan Oster commented

Clearly we continue to see very challenging retail conditions in lockdown-affected areas, with hospitality hit particularly hard. That said, our data shows some signs that hospitality is now bottoming out. Household goods, clothing and footwear and department stores have also been weak, although August shows these declines perhaps partly arrested.

In somewhat encouraging news, the August NAB Monthly Business Survey surprised on the upside. Both conditions and confidence saw a small improvement in the month, though the latter remains well into negative territory, reflecting a sharp deterioration in Victoria and more generally, the degree of uncertainty in the economy as lockdowns persist and the timing of a full re-opening remains unknown. We will closely monitor how businesses and consumers respond to reopening in New South Wales and Victoria while virus continues to circulate.

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