Under pressure, Australian shoppers have again demonstrated their savvy by chasing discounts in May, just as they did last November.
The Australian Bureau of Statistics pointed to evidence that consumers sought cheaper prices during the month, resulting in a 0.6% increase in sales from April.
"Many retailers started end-of-financial year sales early, offering larger discounts than usual, and noted that shoppers remain price-sensitive in response to persistent cost-of-living pressures,” said Rob Ewing, ABS head of price statistics, in Wednesday’s release.
Consumers similarly chased discounts last November (and in November 2022) during events like Black Friday and early end-of-year sales from retailers looking to boost stagnant growth levels.
That saw sales rise by 2.0% last November from October to a seasonally adjusted $36.238 billion, the highest monthly total recorded by the ABS.
Sales growth then declined by 2.4% in December, rose by 0.9% in January of this year, and then drifted sideways to the 0.6% rise reported on Wednesday by the Australian Bureau of Statistics.
(So will June sales give back some of that growth in a fall, as last December did?)
May sales totaled $35.940 billion, just under $100 million lower than last November’s high.
However, May was more than $600 million above the figure for May 2023, a rise of 1.7% (which is less than half the 4% inflation rate over the year to May, pointing to further downward pressure on volumes, even with price cuts).
The AMP’s chief economist, Shane Oliver, wrote yesterday, "Retail volumes continued to contract on an annual basis, and this is the most significant 'retail recession' we have seen in the history of the series in terms of both length and magnitude.”
"Strong population growth means that spending per person continues to trend down on an annual basis.
"Clearly households have tightened budgets further versus last year as retail volumes per person are down around 7.5% from their peak, so retailers have to rely on discounting to stimulate discretionary spending,” Dr. Oliver wrote.
The ABS pointed to some oddities in the May data, such as a surge in alcohol sales in May after a dip in April.
Food-related spending was mixed, with a rise in food retailing (+0.7%) but a small 0.1% drop in cafes, restaurants, and takeaway food services.
"The growth in food retailing was driven by a large rise in liquor retailing (+6.1%), after a large fall in April (-7.4%). People appear to have returned to usual purchasing habits after opting for cheaper alcoholic products in March, stocking up more than usual in the lead-up to Easter, resulting in a lower growth rate in April,” Mr. Ewing said.
“Large cultural events continue to impact cafes, restaurants, and takeaway food services, with the fall in May a reversal of increased spending associated with LIV Golf Adelaide and the AFL Gather Round in South Australia last month.”
The ABS reported that retail sales rose across most states and territories.
Western Australia (+1.3%) and Victoria (+1.2%) had the largest rises, being the only jurisdictions to record growth over 1.0%.
However, consumers didn’t significantly increase their spending in WA for the month, with the ABS pointing to the restoration of the Trans-Australian Railway and Eyre Highway freight routes after they were closed due to very heavy rain and flooding.
"These were shut due to major flooding in March, negatively impacting the supply of retail goods,” Mr. Ewing said.
So, the Reserve Bank can settle back and not get overly excited by a strengthening in consumer demand in May—if anything, the rise in sales and the way consumers chased discounts confirms the huge strain on household finances and savings.
