Retail Bounces As Consumers Spend In Sales & At Restaurants

Retail sales for May rose a stronger than expected 0.7% m/m after being flat the previous month. This was the highest monthly rise since August 2022, apart from the Christmas season, and stands 0.8% above October. Turnover values are now +4.2% y/y after 4.3% y/y in April, in line with stabilising CBA spending intentions. Given the May CPI was flat and ex volatile items up 0.5% m/m, sales volumes may have been positive. Ahead of the July 4 RBA meeting, labour market and retail data were stronger but headline inflation lower with stickier core. It is likely to be another “finely balanced” decision.

• The ABS noted that the solid rise was driven by higher food and restaurant spending as well as “a boost in spending on discretionary goods”, which is in contrast to consumer surveys. People took advantage of discounting in the month and seem prepared to spend at the right price.
• Household goods retailing rose 0.6% m/m, restaurants +1.4% and food retailing +0.3% (driven by higher prices +7.9% y/y). Restaurants are still able to pass on higher costs to diners. Other retailing rose a strong 2.2% driven by online sales and a variety of other businesses. Department store sales fell 0.5% and clothing -0.6%.
• 3-month sales momentum has improved since March and is positive, but with rates rising at the last two meetings and cost-of-living pressures remaining elevated and how consumers use savings buffers unknown, the consumer outlook remains clouded.

Source: MNI - Market News/ABS/CBA