Australian retail sales slowed to the point of stalling in April, coming below expectations (0.3%) after a 0.4% rise in March. Cost-of-living pressures and rising interest rates continue to weigh on spending, with weak household sentiment another headwind. This was a weak start to the quarter after underlying sales volumes contracted in Q1 (-0.6%), despite strong post-pandemic population growth adding to demand.
Headline retail sales were unchanged on the month and lifted by just 0.1% on an ex-food (or discretionary) basis. The 3-month averages for headline (0.2%) and discretionary sales (0.1%) indicate the momentum in retail spending has just about stalled.
Retail sales started 2023 strongly posting a 1.9% rebound in January, but since then the level of sales has largely plateaued. Over that period (to April), headline sales have increased by 0.6% and discretionary sales are up by 0.3%. Price rises (albeit slowing in the sector) and population growth are factors that have prevented outright falls in monthly sales over recent months.
Across the categories, clothing and footwear sales rose sharply by 1.9%, the increase attributed to the earlier-than-usual onset of cooler weather in Australia. Department stores saw a 1.5% rise on the back of this.
Although spending at cafes and restaurants softened in April (-0.2%), turnover remains at a very elevated level (up 34% on pre-pandemic levels) and is continuing to be supported by reopening dynamics; the ABS noted for example that the AFL's Gather Round and the LIV Golf tournament boosted spending in South Australia. The post-pandemic rotation to services spending continues to weigh on household goods (-1%), with spending in the category well down from its late-2021 peak.
Food sales weakened in April (-0.1%) and posted their first month-on-month decline since February-2022. Higher food prices in Q1 (running at 6.8% over the year) may have led to reduced stockpiling by households as underlying volumes were flat.
Overall, this was a weak retail sales report, with population growth and prices holding monthly sales up enough to keep a decline at bay. Total household spending is likely stronger than implied by today's report given the resilience in the services sector; however, demand has slowed considerably since the middle of last year as cost-of-living pressures and rising interest rates have impacted.