According to the Australian Retailers Association, June retail sales increased a slight 2.3% year-on-year growth in the food, cafes, restaurants, and takeaway categories, but beyond food-related business, most categories have declined reflecting current inflation and the rising costs of living.
Overall, consumers swiped their credit cards to the tune of $35.1 billion across Australia in June, according to numbers published by the Australian Bureau of Statistics (ABS).
Suffering the largest drops were household goods which dipped by 4.4%, department stores down 2.1%, clothing, footwear, and accessories all lower by 1.5% and other retailing down 1.1%
The increase of sales in categories like food which is a necessity, disguises a general weakening in retail spending, shared Australian Retailers Association (ARA) CEO, Paul Zahra.
“An increase of 2.3% year-on-year is a concerning result for the industry, considering the impact of price increases and with most categories now in sales declines,” Zahra commented.
Also concerning, retail volumes were down 0.5% for the quarter, which means consumers are tightening their purse strings more than even the last major recession in the early 1990s recession.
“The sharp fall in June retail sales supports the case for the RBA to keep the cash rate on hold at 4.10%,” said ANZ economist Madeline Dunk.
Retail analysts and insiders may be split down the middle on their predictions on if the RBA will tighten rates again, but some suggest a 25-basis point rise regardless of the evident slowing of consumer spending.
“Spending is slowing as household budgets are squeezed by rising mortgage payments and cost of living pressures,” Dunk said.
According to Westpac senior economist Matthew Hassan, retailer vulnerability was apparent in June.
“Department stores recorded a particularly big, and ominous, 5% monthly fall. Clothing was also down 2.2%– both segments having recorded declines in May as well, ‘other retail’ also contracted 2.2% but was coming off a solid gain in May,” he said.
Fred Harrison manages one of the major independent chains in Australia, Ritchies Supermarkets, and he observed customers spending less and leaving with half-full trolleys.
Courtesy of the Australian
“If I look at grocery and liquor, we are slightly in positive territory but not significantly in positive territory, we are probably talking about 2 or 3% like-for-like increases across the board,” he said.
According to Zahara, the retail environment has become “precarious” for retailers “who are simultaneously feeling the pinch of this spending slowdown whilst also at the mercy of rising operating costs across the board.”
With more interest hikes in the potential future, the retail market might see a further decline in July’s numbers.
