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The Australian Bureau of Statistics (ABS) has released national retail trade data for August, posting an increase of 0.2 per cent, following a 0.5 increase in July – a surprise to the downside.
On Thursday morning, NAB analysts forecasted an increase of 0.4 per cent month-on-month (MoM), above consensus of a 0.3 per cent rise. NAB expects another rate rise in November; so do HSBC.
The latest data confirms Australia’s retail spending isn’t as hot as economic analysts were predicting, suggesting an ongoing cooling economy – one still complicated by a historically low unemployment rate.
“The modest rise in August shows consumers continued to restrain their retail spending,” ABS head of retail statistics Ben Dorber said.
“In trend terms, retail turnover rose 0.1 per cent, and was up only 1.3 per cent 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.”
The ANZ Bank’s latest business outlook data published on Thursday showed that a net 65 per cent of firms in the retail sector are intending to raise prices in the next three months, with the Australian dollar exchange rate among the most prominent of forward looking concerns.
Broadly, ANZ’s data released on Thursday also showed retailers are presently most worried about low turnover as households spend less; the cost of doing business, and, persistent problems with finding skilled labour.
Oxford Economics head of macroeconomic analysis Sean Langcake said the low retail spending should be considered in tandem with Australia’s increasing population growth.
“Given the brisk pace of population growth and price inflation, this is a very modest increase in sales in the month. Inflation and higher mortgage and rent costs continue to push up cost-of-living pressures,” Langcake said.
“Consumer spending on services is outpacing retail goods, but overall these data point to another soft outcome for household consumption in Q3.”
July’s data showed that while retail spending had declined for the third month in a row, retail prices were still continuing to rise. In July, like Australia, retailers in New Zealand listed on the NZX were the worst performers.
Australian discretionary retail stocks as a basket were down 1.1 per cent in aggregate across Q2. The last time Australia saw three consecutive month of falling retail sales was back in 2008, at the start of the GFC.
A brief upward surge in May was basically wiped out the following month in June, when that data was released in July.
In the US, Fitch Ratings noted on Thursday that US consumer spending is tipped for a slowdown in 1H24 starting in Q423. Real consumer spending is expected to contract by up to 3 per cent in the second quarter of the next calendar year.
Fitch also noted the percentage of credit card and auto loan balances now seriously delinquent have surpassed pre-pandemic levels.
As for China, the New York Fed revealed overnight on Wednesday its findings Chinese household confidence on outlook for future income gains sits near record lows.
Given that Australia’s economic performance is seen as a proxy of China’s, and one which is led by America’s influence, the datapoints from our biggest economic partners should remain on the radar of those heavily invested in the retail sector.