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Retail trade grows at snail's pace

AAP logoAAP 4/08/2016 Garry Shilson-Josling, Economist

The value of retail turnover rose only 0.1 per cent in June, further evidence that the economy is stuck in the slow lane.

The figures from the Australian on Thursday also confirm the weakness of inflationary pressures that lay behind the Reserve Bank's decisions to cut interest rates in May and again this week.

The key measure of retail prices from the Bureau of Statistics' report, the implicit price deflator for retail turnover, rose by 0.2 per cent in the June quarter, after inching only 0.1 per cent higher in the March quarter.

Compared with a year before, the price level was up by only 1.3 per cent.

With wage rates in the sector rising by 2.5 cent annually at last count, the pressure is on retailers to lift their sales volumes and labour productivity to offset the slower rise in prices.

But growth in volumes - the value of sales adjusted for price changes - is slow as well, just 1.9 per cent over the past year, the smallest annual rise for three years and only two thirds of the average growth rate of the past decade.

And the quarterly pattern of growth shows no sign of a pickup, with the plodding 0.4 per cent gain in the latest three months following three consecutive rises of 0.5 per cent.

Looking ahead, there is no reason to expect this to change.

The key driver of consumers spending is household income, and the two factors driving that - wages growth and employment growth - are both struggling to make any real headway.

Over the past year, growth in wage rates was the slowest on record, while the umber of wage-earning hours worked rose at less than half the normal pace.

So it seems unlikely that the coming year will bring any more joy to retailers than the past year did.

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