Australian retail sales lifted by 0.4% in March (5.4%yr), an outturn that was stronger than the expected rise (0.2%). Food sales (1%) drove the increase - partly reflecting rising prices - as discretionary-related spending (0.1%) remained weak. Sales in the March quarter were flat compared with the final quarter of 2022, pointing to a decline in underlying volume growth after adjusting for inflation.
March's 0.4% rise in retail spending came after gains of 1.9% in January and 0.2% in February. In spite of that, retail spending across the first 3 months of 2023 ($105.5bn) was unchanged from the final 3 months of 2022.
Headline sales in March were $35.3bn, leaving their level flat back to last October. Meanwhile, discretionary sales at $21.3bn were around the levels seen mid way through 2022.
Food sales rose 1.1% in Q1 and extended their run of increases to a 13th consecutive month in March; the ABS noted this increase has been underpinned by rising prices. Discretionary-related spending was weak in Q1 falling by 0.7%, with the ABS attributing this to the effects of rising interest rates and cost-of-living pressures.
Declines in household goods (-3.6%) and clothing and footwear (-0.9%) were the driving components behind weak discretionary sales. Here, aside from weaker demand, falling prices are likely to have played a role, reflecting the disinflationary impulse in imported goods reported in the Q1 CPI data. Spending at cafes and restaurants remained on the rise, up 2.1% in Q1, which the ABS said was both a function of the continued post-pandemic rotation to services spending - supported by the return of major sporting and cultural events - and the pass-through of cost increases to customers.