Quick Bites | Aust Retail Sales Disappoint

The most recent Australian Bureau of Statistics (ABS) retail trade figures disappointed, suggesting consumers are going through a soft patch. Just how long that soft patch lasts, or whether it deteriorates much further, is the big question analysts are grappling with.

Australian retail trade rose just 0.1% in April, rebounding from a 0.4% fall in March, but below market expectations for a 0.2% rise. Year-on-year, retail trade was up just 1.3%. Over the long term, this figure trends around 5%. Real spending volumes remain very soft in Australia, particularly in per capita terms.

The ABS head of retail statistics said, “Underlying retail spending continues to be weak with a small rise in turnover in April not enough to make up for a fall in March…Since the start of 2024, trend retail turnover has been flat as cautious consumers reduce their discretionary spending.” Retail trade in Australia is going nowhere.

Source: Australian Bureau of Statistics

Turnover in most non-food-related industries rose in April. Other retailing (+1.6%) had the largest rise last month, followed by household goods retailing (+0.7%) and department stores (+0.1%). Clothing, footwear, and personal accessory retailing (-0.7%) fell. Food-related spending was mixed with a fall in food retailing (-0.5%), while there was a small rise in cafes, restaurants and takeaway food services (+0.3%). Looking across the past two months, we see weak underlying spending in most parts of the retail industry.

Source: Australian Bureau of Statistics

Why does it matter? The Reserve Bank of Australia is looking for evidence of a slowdown in the economy to help bring inflation back to target. It has kept the cash rate on hold at 4.35% since November 2023. Traders globally have dialled back rate cuts, although we may see a cut from the European Central Bank. In Australia, the market has pushed out expectations for the first monetary easing to next year and is now fully priced for a move lower by June 2025. But if the economic environment softens significantly before then, expectations will pivot to a rate cut sooner rather than later.