Households Sharp Cut In Spending

Retail sales volumes fell 0.5% q/q in Q2, as expected, to contract for three consecutive quarters which has not occurred since 2008. It was down 1.4% y/y – the first decline since 1991 outside Covid. Cost of living pressures and higher rates have meant that households have cut back on retail spending sharply. The RBA noted in its August statement that “consumption growth has slowed substantially” and that “consumption is weak”. If inflation continues to moderate in line with forecasts, the very weak retail position is likely to keep the RBA on hold.

• Q1 was revised down to -0.8% q/q from -0.6% and Q4 to -0.4% from -0.3%.
• Retail prices rose 0.9% q/q in Q2 after 0.7% in Q1 to be the seventh straight quarterly rise.
• Food retailing fell 0.7% q/q, the second consecutive fall, but restaurants fell for the first time since the pandemic down 0.1%.
• Household goods and department store volumes remained depressed falling 1.5% q/q and 1.4% respectively. Clothing & footwear was the only industry to see an increase in sales rising 1.1% helped by discounting.
• The ABS said “the widespread fall in sales volumes reflects what retailers have been telling us about consumers focusing on essentials, buying less or switching to cheaper brands”.

Source: MNI - Market News/Refinitiv