Retail Sales Volumes Down In Q4, Pressures Impacting Budgets

Inflation adjusted retail sales fell less than expected in Q4. They were down 0.2% q/q and up 1.8% y/y, after an upwardly revised +0.3% q/q in Q3.This was the first drop since the Covid-affected Q3 2021 and the first since Q4 2018 pre-pandemic. It is another piece of evidence that price pressures and rate hikes are impacting consumer behaviour. The RBA will be pleased to see demand coming off the boil but will be monitoring developments closely.

• This data is particularly informative given the volatility around the November and December monthly retail sales data and the impact of high inflation on sales values.
• Retail prices rose 1.1% q/q, which is still high but the slowest rate of increase for 2022. It was held down by flat food prices and large Black Friday discounts. The CPI exceeded retail prices due to robust services price increases.
• The weakness in real retail sales was broadbased across non-food categories and the ABS noted that it reflected a slowdown in discretionary spending in the face of the rising cost of living.
• The ABS also observed that “the fall in the December quarter sales volumes suggests that the robust post-lockdown spending that fuelled much of the growth in 2022 has come to an end.”

Source: MNI - Market News/Refinitiv