Retailers are breathing a sigh of relief after inflation eased to 3.9% with the possibility of further RBA rate rises easing.
Economists now claim that Reserve Bank of Australia is more likely to keep the cash rate on hold next week with retailers spanning the specialist audio channel, CE and appliance retailers reporting a “Much improved June trading period”.
Running at 4 % in March, the Australian Bureau of Statistics said that the latest result was only slightly higher than the RBA’s official forecast of 3.8%.
A figure above 4% could have resulted in a cash rate rise to 4.6% per cent from 4.35% a move that would have impacted sales according to observers.
During the latest reporting period, consumer prices grew by 1% in the three months to June.
The latest inflation report comes as separate figures showed Australians continue to spend more but buy less, as retail spending growth in the three months to June lagged price rises.
Several retailers including Harvey Norman, Bing Lee, The Good Guys and JB Hi Fi claim that the market is “Very much a replacement market” with consumers replacing products that are broken or worn out with a cheaper product in a lot of cases.
Retail sales in dollar terms grew by 0.5% in the June quarter, according to the ABS, as end-of-year sales boosted spending on household items including smartphones, notebooks and select appliances especially cooking products as more people cooked at home instead of going out.
Sales volumes when taking into account for price rises – fell by 0.3% the seasonally adjusted figures showed, and for the sixth time in the past seven quarters.
Adjusting for population growth, the picture was even more grim: down by 0.9 per cent (the eighth straight quarterly drop), and 3 per cent lower on a year earlier, the ABS said.
According to the Australian Retailers Association, retail sales saw an overall year-on-year increase of 2.9% in June 2024, compared to the same month last year.
The latest data from the Australian Bureau of Statistics (ABS) revealed June’s retail spending totalled $36.2 billion nationwide.
‘Other retailing’ – including cosmetics, sports and recreational goods – saw the strongest growth in June (up 6.3%) year-on-year along with Department stores (up 4.2%). The staple category of food increased (up 3.1%) with Clothing, footwear and accessories showing welcome growth (up 2.2%) after three consecutive months of decline. Household goods (up 1.1%) and Cafes, restaurants and takeaway services were up modestly (up 1.1%).
Australian Retailers Association (ARA) CEO Paul Zahra said that while strong mid-year/EOFY sales would have fuelled the slight uptick, retailers still have a challenging road ahead.
“We saw many Australians embrace EOFY sales this year due to the ongoing cost-of-living crunch as a means of stretching their household budget,” he said.
“While retailers have enjoyed a slight uptick during June, growth remains modest, and challenges remain as retailers navigate high business costs and a slowdown in discretionary spending.
“There is no doubt shoppers are still feeling the pinch and are therefore being stricter with their spending habits. The RBA decisions for the remainder of this year will have a critical impact on consumer spending and the viability of vulnerable retailers and in particular small business.
“Spending on essentials such as food has remained stable, and there has also been an ongoing shift towards lower priced, value-oriented products.
The AFR reports that while another rate rise cannot be ruled out, analysts generally are expecting the RBA to keep the cash rate unchanged in August if Wednesday’s figures showed underlying inflation had fallen in June.
The RBA has raised interest rates by less than its foreign peers have in an effort to keep the jobless rate as low as sustainably possible, at the cost of inflation staying higher for longer.
That approach has put the RBA in the unusual position of being the only advanced economy central bank outside Japan where investors are still pricing the possibility of another interest rate increase.
