Sluggish retail growth as consumer spending hits historic low
A 0.2% lift in retail sales was recorded by the ABS in August following a stronger 0.5% uptick in July and a 0.8% fall in June.
An early start to warm weather, the Women’s World Cup and Afterpay Day kept Australians spending in August. Yet the 0.2% lift in retail sales was modest given those extra reasons to spend, strong population growth, and still-high inflation.
The lacklustre result recorded by the Australian Bureau of Statistics (ABS) followed a stronger 0.5% uptick in July and a 0.8% fall in June.
ABS head of retail statistics Ben Dorber said the subdued rise suggested consumers were tightening their belts in response to cost of living pressures.
In trend terms, retail turnover lifted 1.3% compared to August 2022 — the smallest trend growth over 12 months in the history of the series.
“Considering how high inflation and strong population growth has added to retail turnover in the past year, the historically low trend growth highlights just how much consumers have pulled back in response to cost-of-living pressures,” Dorber said.
The FIFA Women’s World Cup boosted spending on fan merchandise and on takeaways and meals out.
The unseasonably warm weather and Afterpay Day promotion also helped prop up discretionary spending, particularly on clothes, footwear and personal accessories.
Economists said the numbers were unlikely to move the needle for the Reserve Bank, which is due to make its next call on interest rates on October 3.
A slowdown in spending suggests interest rates are working as intended, with less demand for goods helping to take pressure off prices.
Falling but still elevated job vacancies were similarly unlikely to throw the central bank off course, with the almost nine percent decline in the three months to August still roughly 70% above pre-COVID levels.
NAB head of market economics Tapas Strickland said the job vacancy and retail data would do little to influence interest rate movements in the near term, with the RBA widely expected to stay on hold in October.
He said the monthly consumer price index, released on Wednesday, was more noteworthy and indicative of sticky services inflation.
The headline result for August came in at an annual rate of 5.2%, up from 4.9% in July, with higher petrol prices playing a role.
The August numbers also revealed stubbornly high service inflation, suggesting firms were passing on higher costs for things like labour and energy.
Despite these developments, Strickland said the monthly consumer price index did not offer the full inflation picture and the RBA would likely wait for the quarterly numbers in late October.
The bank’s economists then expect a hike in November, taking the cash rate to 4.35%.
Other economists, including those at the Commonwealth Bank, are not expecting another increase in this cycle.
CBA chief economist Stephen Halmarick said the hurdle to hike again was too high, although the RBA would remain alert to inflation and wage data.
The bank’s economists have pushed back their forecasted date for rate cuts, however, from March to May 2024.
This article was first published by AAP.
