Australian retail sales posted another solid rise in May, remaining resilient to concerns relating to weak consumer sentiment. Headline sales were up 0.9% in the month but were outpaced by discretionary spending (1.1%), a key theme that has been evident year to date.
Retail Sales — May | By the numbers
- National retail sales lifted by 0.9% in May, matching the initial estimate that was above expectations (0.4%), to come in at $34.2bn. Sales in April also advanced by 0.9%.
- 12-month retail sales lifted from 9.6% to 10.4%.
Retail Sales — May | The details
For the 5th consecutive month, Australian retail sales increased with a 0.9% rise posted in May. That matches the rise seen in April but is a step down from the pace in the first quarter where monthly gains ranged between 1.6% and 1.8%. Sales in May were still well above their pre-Covid trend, more than 23% above their level from February 2020.
A key feature of retail sales this year has been the strength in the discretionary categories. Sales excluding basic food were up 1.1% in May to be up by 10.2% year to date. This has outpaced the rise in headline sales (7.1%) over the period and can be seen in the chart below. While this incorporates the impact of rising prices, first quarter GDP data showed underlying demand was robust and that looks likely to have extended into Q2, supported by factors such as eased Covid restrictions, the strong labour market and the high level of aggregate household savings.
In May, basic food sales lifted by 0.6% on the back of increased supermarket spending (0.8%), with rising prices (and reduced discounting) a key factor. Across the discretionary categories, department stores led with a 5.1% rise, cafes and restaurants advanced by 1.8% — with the ABS highlighting the impact of higher prices — other retail was up 1.5% and household goods saw a 0.4% lift supported by furniture (2.9%) and hardware sales (0.6%). The one area of weakness was in clothing and footwear (-1.4%), though that was after a strong rise in April (3.1%). Online sales were down 0.6% in May but are still 30% higher over the year and are 89% above pre-Covid levels.
Outside of Queensland (-0.4%), all other states saw retail sales rise in May (the ACT also saw a modest fall of 0.3%). New South Wales posted a 1.6% increase led by department stores (7.3%), while sales in Victoria were up by 1.3% with strength in cafes and restaurants notable over recent months. Sales in South Australia advanced by 1.9% and by 1.1% in Tasmania but were broadly flat in Western Australia (0.2%).
Retail Sales — May | Insights
National retail sales continued to rise in May despite weak consumer sentiment due to cost of living pressures, with the RBA also commencing its rate hiking cycle in the month. Although the backdrop looks unfavourable, the data suggests households were continuing to spend, especially in the discretionary areas. This has likely been supported by pent-up demand as remaining Covid restrictions have eased, while household savings are very high on aggregate and the strong labour market is supporting nominal incomes.