Australian retail sales saw their strongest rise in 4 months posting a 1.3% increase in July. Despite headwinds to consumer demand from high inflation, RBA rate hikes and weak sentiment retail sales continue to remain resilient with notable strength in discretionary spending.
Retail Sales — July | By the numbers
- National retail sales increased by 1.3% in July, in line with the preliminary estimate that printed well above expectations (0.3%) last week.
- 12-month retail sales accelerated to 16.5% from 12.5%, driven by July's strong outcome and base effects.
Retail Sales — July | The details
Month-on-month retail sales have been on a slowing trend since March but lifted sharply by 1.3% in July. A rotation in spending patterns back to services categories from goods following the easing Covid restrictions has largely been behind this slowdown. July's strong result, though inclusive of inflation, indicates household demand remains robust despite weak sentiment in the face of cost-of-living pressures and RBA rate hikes. In particular, discretionary spending (retail sales ex-food) continues to remain strong.
In July, food sales lifted by 1.2% as spending at supermarkets (1.4%) and specialised stores (2.5%) picked up, likely driven by rising prices. Categories supported by travel and the reopening of the services sector continue to show sustained strength with restrictions removed, with gains of 3.3%m/m in clothing and footwear and 1.8%m/m in restaurants and cafes, while department stores saw a 3.8% rise.
Strong gains in the month came through in New South Wales (1.3%) and Victoria (1.8%) to drive growth in national turnover. But the strength also extended to Western Australia (1.6%) and South Australia (1.2%). Queensland saw a more modest increase (0.4%), though sales in the state are second only to Western Australia on a pre-Covid comparison.
Retail Sales — July | Insights
July's resilience in retail sales looks to have continued through August, based on high-frequency card data compiled by Westpac. An easing in fuel prices from their peaks may be a contributing factor. More broadly, the strength of the labour market with the unemployment rate down at 50-year lows and accumulated savings appear to be continuing to support consumer spending.
