The National Australia Bank (NAB) has released its official sales report for the online retail sector, and there are signs of bad times.

Online retail has taken a dive: NAB report

The National Australia Bank (NAB) has released its official sales report for the online retail sector, and there are signs of bad times.
NAB chief economist Alan Oster said the report has a ‘very weak’ forecast for retailers.
The NAB’s cashless retail sales index is highly regarded as one of the more accurate reports when it comes to predicting the results of the Australian Bureau of Statistics (ABS) own findings on the nation’s economy.
Because it processes about 2 million cashless transactions per day, NAB has a wealth of data that allows it to report on retail spending behaviour to forecast sales trends. But if its newest report is right, a majority of those transactions are not going into retail sales.
The following months are also looking bleak, with Mr Oster further saying that “ABS retail trade will fall 0.5% a month-on-month basis, the weakest forecast in our series going back some half a decade”.
Retail leasing specialist Phillip Chapman, director of Lease1, commented: “Another weak result such as this is the last thing the retail sector needs, with a decade of record low inflation and margin compression, the industry needs to desperately find a savings in occupancy costs.”

The report

NAB is certain that there are a number of issues (both locally and abroad) that could be behind this downward trend. Among these included are costs in the housing market, low income growth among consumers, as well as competition from e-commerce (which NAB had reported on more positively in its March sales index for online retail). The NAB Online Retail Sales Index contracted -3.8% in April on a month-on-month (mom), seasonally adjusted (sa) basis. This follows an upwardly revised March result (+2.4%, was +1.7% mom, sa). While not of the same magnitude, the April result is consistent with the broader retail sales weakness it has identified in its Cashless Retail ABS forecast for April (-0.5%).
After a strong March, all eight online retail categories recorded a contraction in month-on-month sales growth, with the largest sales category, Homewares and appliances (-6.9% mom, sa), the second weakest in the month behind takeaway food (-8.6%). In year-on-year terms, five of the eight NAB Online Retail Sales Index categories were lower compared to April 2018. Department and variety stores remains the fastest growing category in year-on-year terms (26.1% y/y). Games and toys performed best, albeit contracting, in month-on-month terms (-0.2% mom, sa).
In month-on-month terms, all states and territories recorded a contraction in growth, led by Tasmania (-6.4%). The two largest online sales states, NSW (+0.5% yoy, sa) and Victoria (+1.6%), recorded considerably weak year-on-year growth in April.
At +0.7%, international online retailers performed better in month-on-month terms relative to domestic competitors (-4.4% mom, sa). However, in year-on-year terms, from the series, considerable weakness in international online sales remains.
The NAB estimates that in the 12 months to April, Australians spent $28.98 billion on online retail, a level that is close to around 9% of the traditional bricks and mortar retail sector (March 2019, Australian Bureau of Statistics), and about 17% higher than the 12 months to April 2018.

NAB chief economist Alan Oster commented:

“Our NAB Online retail sales index data indicates considerable weakness in online retail sales for April 2019. Online retail sales tend to be more volatile than broader retail, experiencing far greater monthly fluctuations. This month, both online retail and broader cashless retail series indicated very weak retail conditions. While year-on-year growth in online sales has also slowed considerably in recent months, these comparisons are made to a period of elevated sales in 2018, with major new merchants to Australia, and also pre-GST exemption effects.
“By category, department stores continued to lead year-on-year growth. In the month, all categories experienced a contraction in sales, with a drop in sales for Games and Toys the most mild. In month-on-month terms, Takeaway food (-8.6% mom, sa) was the worst performer. This result may indicate structural change in this sector given recent high profile exits and consolidation. The largest spending share category, homewares and appliances, recorded the second worst growth rate in the month, and also contracted in year-on-year terms. The Cashless retail indicator also pointed to weakness in this key retail sector in April. While department stores continue to record the strongest growth, this category has slowed from high double digits post the introduction of the GST on all goods in July 2018.
“Tasmania, with about 2% of online retail sales, was weakest in April, after leading growth in March. New South Wales, Victoria and Queensland represent over three quarters of the online market in Australia by sales value. Of these larger sales states, Queensland was strongest over the year.
“By merchant location, domestic online retailers continue to outpace their offshore counterparts, with international slowing in year-on-year terms. However, domestic retail sales contracted in the month, while their international counterparts recorded mild growth.
“It is worth noting here that our definition of a domestic online retailer can include those merchants whose parent organisation might be overseas with an Australian Subsidiary. Using GST as a key defining characteristic of domestic and international is no longer appropriate given changes made in July 2018,” Mr Oster said.

Australian retail turnover fell 0.1 per cent in April 2019, seasonally adjusted, according to the latest ABS Retail Trade figures.

Retail continues to struggle, back on the slide

Australian retail turnover fell 0.1 per cent in April 2019, seasonally adjusted, according to the latest Australian Bureau of Statistics (ABS) Retail Trade figures.
This follows a rise of 0.3 per cent in March 2019.
“There were mixed results across industries,” said ABS director of quarterly economy-wide surveys Ben Faulkner. “We had falls in Household goods retailing (-0.9 per cent), Cafes, restaurant and takeaway food services (-0.7 per cent), and Clothing, footwear and personal accessory retailing (-1.2 per cent), which were offset by rises in Other retailing (0.8 per cent), Department stores (1.8 per cent), and Food retailing (0.2 per cent).”
In seasonally adjusted terms, there were falls in New South Wales (-0.4 per cent), Victoria (-0.4 per cent), the Northern Territory (-0.5 per cent), and the Australian Capital Territory (-0.2 per cent). There were rises in Queensland (0.7 per cent), South Australia (0.6 per cent), Western Australia (0.1 per cent), and Tasmania (0.3 per cent).
The trend estimate for Australian retail turnover rose 0.2 per cent in April 2019, following a 0.2 per cent rise in March 2019. Compared to April 2018, the trend estimate rose 2.9 per cent.
Online retail turnover contributed 5.7 per cent to total retail turnover in original terms in April 2019, which was unchanged from March 2019. In April 2018, online retail turnover contributed 5.4 per cent to total retail.
More detailed industry analysis and further information on the statistical methodology is available in Retail Trade, Australia (cat no. 8501.0).

Salary guide reveals a 'tug of war’ for logistics

According to the FY 2019/20 Hays Salary Guide, more logistics professionals will receive a pay rise this year than last, but it will be a less significant increase than they hoped for.
The research also revealed that 92 per cent of employers will increase their transport and distribution staff salaries in their next review, up from 83 per cent who did so in their last review.
However, the guide found that the value of these increases will fall. 71 per cent intend to raise salaries at the lower level of 3 per cent or less, up from 63 per cent who did so in their last review. At the other end of the scale, just 3% of employers intend to grant pay increases of more than 6 per cent.
“Evidently, the aggregate effect of several years of sedate salary increases is taking its toll and we’re now seeing a tug of war over salaries,” Tim James, Managing Director of Hays Logistics said.
“On the one hand, we have professionals telling us they’ve prioritised a pay rise and are prepared to enter the job market to improve their earnings. On the other, employers tell us they want to add to their headcount and are being impacted by skill shortages, yet they want to curtail salary increases.
There are only a few exceptions. The recovery of the senior supply chain market led to demand for Supply Chain Managers and, in turn, mid-tier Demand and Supply Planners. In some states, salaries have increased in response to this demand.  Tasmania’s positive economic climate led to a surge in interstate and international exports,” he concluded.

Business Expectations Survey: confidence tanks

Graph: Business Expectations Index, March Quarter 2019.

Business confidence for the March quarter has fallen across the board, with the illion Business Expectations Index for the March quarter 2019 down 7.1 per cent annually. The headline index saw significant declines in the sales, profit and investment sub-indices on both a quarterly and annual basis.
The manufacturing sector is expecting a particularly grim start to the year, with expected sales plummeting 32.4 per cent year-on-year, while profit expectations have fallen 23 per cent. By contrast, retailers are expressing more optimism heading into 2019, with the sector reporting increases in both expected and actual sales, profits and capital investment.
Soft start to new year
There were sharp declines in expectations across all categories of the survey, with sales, profits, employment and capital investment all falling. If these expectations are realised, it is likely that economic performance over 2019 will significantly undershoot the latest forecasts from the Reserve Bank of Australia. Based on the latest survey data, the economy is likely to experience a soft landing in 2019, while any further downturn in business expectations will raise the possibility of significantly weaker economic conditions.
“There were sharp declines in expectations across all categories of the survey, with sales, profits, employment and capital investment all falling,” said illion economic adviser Stephen Koukoulas.”
If these expectations are realised, it is likely that economic performance over 2019 will significantly undershoot the latest forecasts from the Reserve Bank of Australia. Based on the latest survey data, the economy is likely to experience a soft landing in 2019, while any further downturn in business expectations will raise the possibility of significantly weaker economic conditions.”
“The final business expectations results for the March quarter reflect widespread uncertainty among Australian business,” said illion CEO Simon Bligh
“Local factors driving uncertainty include the approaching federal election, while everything from the flow of credit and residential house prices through to regulation and corporate governance will be impacted by the Royal Commission, due to deliver its final recommendations in early February.
“Globally, equity market turbulence in the US, Europe and Asia has carried into the new year. This is being compounded by additional unknowns such as US political division crystallising in the form of an extended government shutdown, Brexit entering its endgame and increasing signs of China’s economy slowing.
“Despite all the noise, Australia’s business landscape remains fundamentally sound, with unemployment historically low, exports holding firm and major long-term government projects either underway or about to start.”
Heavy declines across all indices
“The latest illion Business Expectations survey shows a further moderation in economic conditions at the end of 2018, and indicates a potentially disconcerting start to 2019,” said Mr Koukoulas.
“The decline in the expectations index fits with recent economic news, which shows weaker economic growth, a sharp downturn in housing and weaker global conditions. The 15.5 per cent decline in the Actuals index could also point to a weak end to 2018, a view backed by recent disappointing official data for September quarter GDP.”
The Business Expectations index for the March quarter now stands at 20.9 points, down 12.9 per cent from the prior quarter and marking a fall of 7.1 per cent on a year-on-year basis. Meanwhile, the Actuals index followed a similar pattern, dropping 15.5 per cent between the June and September quarters, and down 3.7 per cent annually.
Bleak expectations for March quarter
Expectations for financial performance are down across the board, with the majority of industries predicting a significant slump heading into the March quarter. The most notable decline in expectations comes in the form of sales numbers, with the overall index dropping by 17 per cent to 30.2 points. Employee expectations also took a hit, with a reported 5 per cent decline, while profit forecasts slumped 12.5 per cent to 23.9 points. Expectations also appear to be on a downswing compared to the previous year, with sales down 11.7 per cent annually and the profit index 8.8 per cent lower.

Sub-indices Expectations, March Quarter 2019.

“The reported decline in expectations came from all categories of the survey – sales, profits, employment and capital investment were all lower than the last uptake,” said Mr Koukoulas. “If these expectations come to fruition, economical performance heading into the 2019 calendar year will significantly undershoot the latest forecasts from the Reserve Bank of Australia.”
Optimism at a low point
Businesses have become less optimistic on growth prospects, with 61.4 per cent of business owners and executives surveyed in December reporting an increase in optimism, down from 66.6 per cent in the November survey. Meanwhile, 27.2 per cent of businesses said they felt less optimistic about growth prospects, compared with only 20.9 per cent in November. The last time optimism responses fell so low was in August 2017.
Optimism at lowest point since August 2017.

“The slowdown in the economy is beginning to affect business optimism,” Mr Koukoulas said. “While not at levels that would signal a hard landing for the economy into 2019, the decline in the number of firms which expressed an optimistic outlook for the March quarter, as well as the rise in pessimism, is pointing at a clear downside risk if the trend continues.”
Selling prices expectations up
Although the economy is expected to make a soft landing over 2019, one element of the data is at odds with this idea – both expected and actual indices for selling prices increased, with expectations up 7.6 per cent over the previous quarter, and up 38.9 per cent compared with the same time last year. Actual selling prices jumped 18.9 per cent over the previous quarter and up 10.9 per cent on the year-earlier period.
Selling Prices Index, March Quarter 2019.

“The lift in expected selling prices in the data is the one point that contradicts the business sector’s slowing momentum, Mr Koukoulas said. It is possible this increase was caused by inflation effects flowing on from the Australian dollar’s recent weakness, but official data on the topic suggests inflation is currently low.


Will Port Botany battle through the Newcastle storm?

The Port of Newcastle has developed the concept for a staged container terminal development at its Mayfield site, which the company says is the largest and best connected vacant port land site on the eastern seaboard of Australia.
Together with direct water frontage and potential for deep water berthing, the Newcastle Container Terminal represents a once in a generation opportunity within the Port of Newcastle, the company says.
The Mayfield site has the capacity for a 2 million TEU per annum container terminal, coupled with a shipping channel that can accommodate vessels up to 10,000 TEU, with the capability of even larger vessels with some ancillary channel modifications.
Newcastle is an efficient option for importers and exporters in northern, western, north western and far western NSW.
A Newcastle Container Terminal would deliver substantial cost savings for NSW exporters and importers, save the NSW government billions in infrastructure spending and help reduce Sydney road and rail congestion.
Report quantifies benefits at $6 billion
In a report released on 11 December 2018, economic consultants AlphaBeta quantified the potential economic benefits to the NSW economy of $6 billion by 2050 and 750,000 truck movements off Sydney roads.
The report examined the economic impact of opening a container terminal at Port of Newcastle. It found the NCT would increase NSW Gross State Product (GSP) by $6 billion by 2050. Over half of the $6 billion in new economic value for the state would come from lower freight costs. Customers would save $2.8 billion in land transport costs in Port of Newcastle’s potential market by 2050 through shorter journeys and more efficient operations.
The average land transport journey to port for northern NSW exporters (compared with Botany) would nearly halve. Meanwhile, customers served by Port Botany would save $1.2 billion in freight costs as competitive pressure leads to lower prices. Sydney would also benefit from less freight traffic on its roads. This would create $500 million in extra value from avoided infrastructure spending, and reduced congestion and pollution costs (see Exhibit 3.).

Opening a container terminal in Newcastle would also have broader economic and social benefits, including stimulating exports and jobs in the Hunter Region and Northern NSW. Key sectors, such as agriculture, food processing and advanced manufacturing, would see exports grow in value by an extra $800 million by 2050. More than 4,600 jobs would be created in the Hunter Region and Northern NSW by 2050, in industries as diverse as transport, construction, agriculture, manufacturing and local services.
Adding a container terminal to Port of Newcastle could generate $2.8 billion in freight savings to importers and exporters in the Newcastle, Hunter and Northern regions of NSW by 2050. Currently, importers and exporters are served by Port Botany in Sydney or Port of Brisbane.
Both ports are hundreds of kilometres from the origin or destination points of freight in the Hunter Region and Northern NSW, an area responsible for about a sixth of imports and exports in NSW.
Opening a container terminal in Newcastle would nearly halve the average overland freight journey in these areas, immediately reducing transportation costs for imports and exports.
As Port of Newcastle will be home to a new, fully automated container terminal with an integrated intermodal terminal facility, it would also introduce productivity improvements in freight handling, generating further savings for Hunter Region and Northern NSW customers. If all freight customers in the potential addressable market switched to being served from Newcastle, the cumulative savings would be equivalent to $2.8 billion in additional GSP in NPV terms by 2050.
Potential market for Port of Newcastle
This study defines the potential market as NSW regions that are more cost-effectively served from Port of Newcastle than from alternative ports such as Port Botany, Port of Brisbane, and Port of Melbourne.
Importantly, the report did not consider the potential benefits that could be gained by actively promoting the Newcastle container port to Sydney-based businesses.

47% of employers plan to increase headcount

Transport Allocators, Warehouse Managers and Supervisors, and Import and Export Coordinators are areas of demand in logistics for employers who plan to increase permanent staff levels this financial year, according to recruiting company Hays.
In a survey of more than 3,000 organisations representing over 2.3 million employees for the annual Hays Salary Guide, the recruiter found that strategy and consulting will lead jobs growth, with 63 per cent of employers indicating they’ll add to their headcount in this area.
This is followed by general management (57 per cent), information technology (53 per cent) and project management (51 per cent). Fifty per cent expect to increase their human resources, operational management and sales permanent headcounts.
Twenty-two per cent of employers will also increase their use of temporary and contract staff. The trend of employing temporary and contract staff on a regular, ongoing basis will continue, with 24% of employers now doing so.
“The coming six months will see continued labour market strength, with permanent and temporary hiring intentions suggesting further employment gains,” said managing director of Hays in Australia & New Zealand Nick Deligiannis.
“However, employers say the shortage of highly-skilled professionals will impact the effective operation of their organisation or department.”
According to the Hays Jobs Report, covering the July to December half, skills in demand for the six months ahead in logistics and manufacturing include:
Logistics: Transport Allocators, Warehouse Managers and Supervisors and Import and Export Coordinators are areas of demand.
Manufacturing & Operations: Field Service Technicians, Engineering Drafters, Production Managers and Engineering Managers with technology and robotics experience are needed.
Procurement: Demand exists for Category Managers with end-to-end procurement skills, Procurement Officers and Senior Procurement Managers with a strategic focus.
Retail: Retail professionals with digital development and marketing expertise are required, as are Store Managers with experience implementing change and Merchandise Planners.

Winter chill brings a little hope for retail: turnover rises 0.4%

Australian retail turnover rose 0.4 per cent in May 2018, seasonally adjusted, according to the latest Australian Bureau of Statistics (ABS) Retail Trade figures.
This follows a 0.5 per cent rise in April 2018.
“Department stores (3.9 per cent) led the rises,” said Ben James, director of quarterly economy wide surveys. “There was also a strong result in clothing, footwear and personal accessories, which rose 2.2 per cent. Both industries were able to rebound after unusually warm weather impacted April sales.”
There were also rises in food (0.3 per cent) and household goods (0.1 per cent). Cafes, restaurants and takeaways led the falls (-1.0 per cent), whilst other retailing also fell (-0.1 per cent).
In seasonally adjusted terms, there were rises in New South Wales (0.5 per cent), Queensland (0.4 per cent), South Australia (1.1 per cent), Victoria (0.2 per cent), Tasmania (1.5 per cent), and the Northern Territory (0.4 per cent). Western Australia, on the other hand fell (-0.5 per cent) in seasonally adjusted terms, whilst the Australian Capital Territory (0.0 per cent) was relatively unchanged.
The trend estimate for Australian retail turnover rose 0.3 per cent in May 2018 following a rise (0.3 per cent) in April 2018. Compared to May 2017, the trend estimate rose 2.8 per cent.
Online retail turnover contributed 5.6 per cent to total retail turnover in original terms in May 2018, a rise from 5.4 per cent in April 2018. In May 2017 online retail turnover contributed 3.9 per cent to total retail.
More detailed industry analysis and further information on the statistical methodology is available in Retail Trade, Australia (cat no. 8501.0).

Employment outlook brightens once more

MYOB’s latest Business Monitor survey of more than 1,000 SME has highlighted continued growth and confidence going into the new financial year. The research shows strong signals that business will continue to improve over the coming year, with positive growth indicators including new jobs, wage growth and sales in the pipeline representing continued optimism and confidence.
Employing more full time staff and paying higher wages
Australian businesses are looking to employ more full-time staff and pay their staff more, according to the latest MYOB Business Monitor survey of more than 1,000 business operators around the country.
Employment growth is on the horizon for SME, with 15 per cent of businesses planning to increase the number of full-time staff in their business. This figure has increased from 11 per cent in the same Business Monitor survey of November 2017.
Just under a quarter (23%) of operators surveyed revealed they intend to increase wages and salaries paid to employees in the next 12 months. Pay increases are most likely in the manufacturing and wholesale industry (31%) and the retail and hospitality trade (29%).
Two in five operators (41%) expected their revenue to remain the same over the next 12 months, with a further 33 per cent expecting their revenue to increase in the next 12 months. For the next quarter, 40 per cent of operators indicated they had more sales/work in the pipeline for the June to August period.
SME indicated continued confidence and optimism going into the new 2018-19 financial year. 33% of Australian small and medium business operators expected the Australian economy to improve over the next 12 months, showing continued improvement since May 2017 when only 25% of Australian operators expected to see an improvement. Overall, satisfaction levels with the Federal Government are also up from 27% to 33% since May 2017.
Among the sectors, the manufacturing and wholesale industry are most likely to expect the economy to improve in the next 12 months (46%), and the construction and trades industry are least confident in predicting continued economic improvements (24%).
MYOB CEO Tim Reed said the results show the SME community is continuing to walk-the-walk.
“By putting people first and investing in human resources, SME are showing their confidence in the economy and their commitment to building better businesses. Investing in skilled workers is the means through which they will create future innovation and gain a competitive edge,” he said.
The great tech divide: regional Australia lags behind
There are still significant barriers for businesses in regional Australia. The research shows that rural businesses are amongst the most likely to be technology laggards. Up to 60 per cent of regional small business owners are operating without any online presence whatsoever, a statistic that is significantly higher than the nationwide figure (34%). Only 11 per cent of regional SME surveyed have both a business website and a social media account for their business.
By sector, the industry most likely to be based in regional Australia again lagged behind in technological adoption, with up to 64 per cent of agribusinesses operating without an online presence. Geographically remote Western Australia-based operators were also significantly more likely to be late adopters of technology (50% without an online presence).
Educational programs aimed at improving digital literacy are important for Australia’s economic prosperity.
“We absolutely encourage SME to continue to use digital tools for their business. Creating an online presence and using it to interact with and service customers is a simple, necessary step to helping your business succeed.
“Digital literacy programs that are inclusive of Australia’s geographically isolated SME operators will be important for removing barriers to business growth and success in the regions,” Mr Reed said.
“It is the responsibility of the government and leading corporate technology providers to do as much as they can to encourage upskilling and digital adoption across the small business community, no matter where you live.”

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