Inflation and interest rates have hit Aussie homes hard, which was evident to retailers who saw August stock turnover rising only 0.2%, the smallest amount annually on record apart from the lockdown.
Compared with July’s turnover of 0.5%, August’s results did not meet market expectations of a 0.3% gain, according to Australian Bureau of Statistics (ABS) data.
For now, the Reserve Bank will hold rates at 4.1% next week, despite monthly inflation increasing to 5.2% in August.
According to KPMG chief economist Brendan Rynne: “The subdued retail figures will give more ammunition for the RBA to hold rates next week, following the high petrol prices highlighted in Wednesday’s CPI figures, which have the effect of pulling back aggregate demand across the economy.”
“The broad impact of high fuel prices, combined with weak retail sales would seem to indicate a further rate pause on Tuesday,” he said.
Retail sales for the season were adjusted up 1.5% in the past year, the lowest since the August 2021 lockdowns.
After smoothing out the volatile timeframe with a trend metric, retail turnover was up 1.3% from 2022, the smallest trend growth over 12 months in the history of the series, according to the Australian Business Review.
“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,” ABS head of retail statistics Ben Dorber said.
The Reserve Bank of Australia building is seen in Sydney, Tuesday, October 1, 2019. The Reserve Bank has cut the official interest rate to a new record low of 0.75 per cent in a bid to drive up wage growth and reduce unemployment. (AAP Image/Dan Himbrechts) NO ARCHIVING
According to AMP chief economist Shane Oliver, real retail sales were down 2% from August 2022 when not averaged in nominal terms.
“With population growth running around 2.5%, retail sales per person are actually down 1% year-on-year, and real retail sales per person are down around 4.5% year-on-year.”
“September quarter real retail sales are on track for their fourth quarterly fall in a row, highlighting the pressure on households from interest rate hikes and cost of living pressures.”
Holding firm in retail categories were footwear, clothing, and personal accessories, which recorded the highest rise in August to be up 1.3%. Restaurants, cafes, and takeaways followed with an increase of 0.7%. Department stores logged a 0.4% leap downhill from 3.7% in July.
“Warmer than usual weather and additional promotional activity linked to Afterpay Day lifted spending on discretionary goods, especially clothing, footwear and personal accessories,” Dorber said.
“Spending was again boosted by the 2023 FIFA Women’s World Cup, with strong demand for fan gear and increased spending across cafes, restaurants and takeaway food outlets as large crowds attended matches and live sites across the country.”
Household goods continued to fall down to 0.4%, the ninth monthly fall in turnover in the past year. Food retail dropped 0.3% amidst a repetitive reduction in food inflation.
Western Australia had the most robust growth of 0.5% when comparing states, while Victoria and Queensland trailed the state. South Australia and Tasmania had a tightening in spending, while NSW was static.
