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Retail Sales Up, ARA Warns Inflationary Impact Coming Soon

Retail sales increased in July by 17.9 per cent year-on-year, although the Australian Retailers Association warns these figures are quite misleading.

According to Mastercard SpendingPulse, most retail categories recorded impressive year-on-year growth, with lodging (up 63.3 per cent), jewellery (up 47.6 per cent) and apparel (up 31.3 per cent) the biggest discretionary spending leaps.

Australian Retailers Association (ARA) CEO Paul Zahra warns that we are comparing these figures to twelve months earlier, when a lot of the country was under Delta lockdowns.

“In July last year, our two largest states were in lockdown and spending dried up as many non-essential retailers were forced to close their doors. It wasn’t until October that businesses in NSW and Victoria finally reopened, and consumers were able to shop in-stores once again,” he says

“With travel restrictions in place a year ago, and tourism operators pushed to the brink, it’s no surprise to see lodging leading the way, with sales up 63.3 per cent, as people get back to booking accommodation for work and holidays in Australia and abroad.

“The current retail trade environment is very different to a year ago and businesses are dealing with a whole new set of challenges due to inflation and rising costs associated with fuel, energy, supply chains and rents.

“What’s pleasing is that sales are currently holding up well despite the rising cost of living and interest rates, although it appears as though we haven’t seen the full impact of this hit consumers.”

Zahra quotes ARA’s forecasts with Roy Morgan on Father’s Day gift spending, which shows it will be down 7.7 per cent compared to last year, with 42 per cent of consumers saying the current cost of living challenges will impact how much they’ll spend.

“The concern is with inflation yet to peak, consumers will start to be squeezed when it comes to their discretionary purchases.”

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