Australian retail sales declined in October and fell for the first time this year driven by weakness in discretionary spending. Households' resilience to cost-of-living pressures, weak sentiment and RBA rate hikes may be starting to fade, though spending on services likely remains strong and retail sales may bounce back in November due to Black Friday sales.
Retail Sales — October | By the numbers
- National retail sales declined by 0.2%m/m in October to $35.0bn, much weaker than expected (0.5%) and down from a 0.6% rise in September.
- 12-month retail sales weakened from 17.9% to 12.5%; the base period coincided with reopenings from Delta wave lockdowns in Sydney and Melbourne.
Retail Sales — October | The details
The first signs of an outright weakening in consumer demand were reported in today's retail sales data for October. Headline sales fell by 0.2% in the month, but that was propped up by a 0.4% rise in basic food sales amid higher prices and stockpiling associated with floods in parts of Australia. Sales ex-food were down by a larger 0.6% in October, reflecting broad-based weakness in discretionary spending across department stores (-2.4%), clothing and footwear (-0.6%), household goods (-0.5%), cafes and restaurants (-0.4%) and other retail (-0.2%).
Aside from cafes and restaurants, which saw their weakest result since the beginning of the year, the other discretionary categories have seen larger falls at different times over recent months. The key point in October was that the weakness in discretionary spending came across the board at the same time.
From a state perspective, sales fell in 6 of the 8 jurisdictions. Although the largest month-on-month percentage falls were in the Northern Territory (-1.8%), Tasmania (-1.7%) and the Australian Capital Territory (-1.4%), sales in those jurisdictions make up less than 5% of national turnover. Around 75% of national retail sales are made down the east coast, so it was declines in New South Wales (-0.1%), Victoria (-0.1%) and Queensland (-0.4%) that drove the weakness in October. Sales were flat in South Australia and Western Australia.
Retail Sales — October | Insights
Household spending has proved resilient to headwinds from cost-of-living pressures, weak sentiment and rising interest rates, but October's report gave tangible signs of that fading. That said, the level of spending remains very elevated. Although the momentum in retail sales has been softening over recent months, spending on services (largely excluded in the retail data) has been picking up strongly as the effects of the pandemic and its restrictions have waned. The other key point to keep in mind is that spending patterns in Australia have changed over recent years as the prominence of Black Friday sales has risen. That could see retail sales rebound strongly in November as households bring forward Christmas spending to align with the Black Friday sales period. The full details for October retail sales will be published in the full release from the ABS on Friday.
