Another solid month for Australian retailers with August sales up 0.6%, confirming Australian consumers have yet to pull back significantly in the face of interest rate increases from the Reserve Bank.
Australian Bureau of Statistics (ABS) data showed the rise in August was the eighth consecutive monthly rise and follows a 1.3% rise in July, and a 0.2% in June.
It was also a little stronger than the 0.4% rise estimate from the market.
Compared to Covid hit August, 2021, sales last month were up 19%, with inflation playing a major part as well as the low comparative base a year ago.
Consumers went for food – both eating in, eating out and spending more at department stores which continue to do well (as Myer’s recent year to July report confirmed, as well as its early update for the start of its 2022-23 financial year).
We will be getting September monthly data from the ABS and quarterly updates from major chains in about a month’s time.
Ben Dorber, head of retail statistics at the ABS, said in the release: “This month’s rise was driven by the combined increase in food related industries, with cafes, restaurants and takeaway food services up 1.3 per cent and food retailing up 1.1 per cent.”
“While households continue to spend, non-food industry results were mixed and only contributed a small amount to the total rise in retail turnover.”
Department stores rose 2.8% to a new record level, while household goods retailing had its largest rise since March with a 2.6% rise after falls in sales in the three previous months.
Both will attract the attention of the Reserve Bank ahead of next Tuesday’s monetary policy decision meeting because they are major areas of discretionary spending which rising interest rates are supported to discourage.
Other retailing fell for the first time following five consecutive monthly rises, down 2.5%, which was the largest fall in other retailing category this year.
Clothing, footwear and personal accessory retailing also recorded its largest fall this year, down 2.3% in August following two consecutive rises.
AMP Chief Economist, Shane Oliver reckons the continuing strength in retail sales so far “likely reflects a combination of accumulated savings built up through the pandemic which has provided a buffer for households, positive wealth effects from the rise in home prices into early this year, the still strong jobs market and lags in the flow through of RBA rate hikes into home borrowers’ debt interest payments.”
“However, while retail sales have remained stronger for longer than we have been expecting, we continue to expect a slowdown ahead as rate hikes are fully reflected in mortgage payments, rates continue to rise, negative wealth effects from now falling home prices start to impact, consumer confidence remains depressed and the run down in the saving rate runs its course.
Dr Oliver says the stronger retail sales data and the still strong jobs data and ongoing high and still rising inflation (which will be confirmed in the first monthly indicator to be issued Thursday) “adds to the risk that the RBA will hike by another 0.5% next week, whereas we continue to think they should be slowing the pace of hikes to better allow time to assess the impact of past hikes and allow for their lagged impact.”
