June retail trade sales expanded 2.9% y/y (unadjusted), the strongest figure posted since November 2016. General dealer sales, which accelerated to 2.5% y/y, added 1.1 pps while a 12.4 % y/y increase in food and beverage sales added another 0.9 pps. After a very poor start to the year, it appears that clothing retailers may be experiencing modest relief with sales jumping 3.9% y/y.
Sales of household furniture and equipment expanded by 8.3% y/y but the improvement was largely a result of base effects and we expect that household consumption of durable goods will remain under pressure despite the recent interest rate cut. In a reversal of fortunes, pharmaceutical goods sales contracted (-1.9% y/y) for the first time since May 2014, but this was due to a much higher base in June 2016 when sales rallied 10.4% y/y. Hardware sales continue to be under pressure, declining -7.1% y/y. The data shows that the sector expanded by 2.1% q/q and 2.2% y/y in 2Q17.
The result, which when viewed with the June mining and manufacturing data, suggests that GDP could rebound by as much at 2.5% q/q in 2Q17, but remain at a pedestrian 0.5% y/y. Overall, the outlook for household consumption remains muted given just how weak consumer confidence is, although a shallow rate cutting cycle should provide modest relief until higher taxes are likely to take hold after the February budget.
