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CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Saturday, 4 November 2017

Deflator!

See y'later, price deflator

Goodness me, some potentially very significant developments on the retail front!

Retail turnover, having declined by -0.5 per cent in August was one again miserably flat in September 2017. 

Retail turnover was -0.7 per cent lower over the quarter, which is an extraordinarily weak result, even if it is coming off the back of some more robust readings.


In annual terms, this was the weakest result since June 2013, with the trend now looking decidedly limp.


A key takeaway is that retail volumes were higher over the quarter (following on from a solid second quarter), albeit marginally, with the decline in retail turnover reflecting price discounting

The retail deflator came in at at -0.4 per cent, the weakest result in nearly two decades, to be -0.3 per cent lower over the year. 

Yes, that means deflation - and it was reflected across most industries, with cafes & restaurants being an honourable exception.  

Across the board

The weakness in retail turnover over recent months has been experienced across most industries, with household goods recording a particularly soft quarter. 

Chain stores and the major retail players have continued to fare reasonably well, but smaller retailers are finding it tougher to gain traction. 


And while some states and territories fared worse than others over the third quarter - most notably the Northern Territory - retail turnover was down across the board. 


The wrap

It rarely pays to get too carried away with monthly figures - they can, after all, have a tricky habit of turning corners - but the trend suggests that we may be experiencing some instances of quite significant retail price deflation. 

In plain English, retailers have cut prices, but thus far have failed to inspire much in the way of increased sales volumes. 

In particular, the prices of some household goods, food, certain clothing & footwear, and new car prices are all looking favourable for consumers right now, in spite of the more widely reported spike in electricity prices. 

Unsurprisingly, in light of this evidence, the Aussie dollar took a bit of a tumble, and markets are no longer pricing any rate hikes in 2018.

Owners of retail stocks should be concerned about this, with the sector already seeing some high-profile casualties, and valuations being downgraded.

And now comes Amazon.