Australian retail sales rebounded more strongly than anticipated in July, with discretionary spending boosted by the FIFA Women's World Cup and school holidays. Following a 0.8% fall in June, headline sales advanced 0.5% in July, an outturn near the top end of the range of forecasts and well above the expected 0.2% rise. Discretionary sales (0.9%) outpaced the headline increase as spending rebounded across cafes and restaurants (1.3%), department stores (3.6%), and clothing and footwear (2%).
The July report continued the volatile profile seen in retail sales over recent months, reflecting a combination of seasonal effects and shifts in spending patterns. April sales fell (-0.1%) amid Easter holidays; end of financial year sales brought forward spending into May (0.8%) before reversing in June (-0.8%); a rebound has subsequently come through in July (0.5%), attributed by the ABS to the FIFA Women's World Cup and school holidays.
Smoothing out the volatility, the momentum in retail sales has been soft, consistent with the broader slowdown in household consumption. Monthly retail sales have averaged a 0.2% increase over the past 3 months, indicating sales are tracking at an annualised pace of around 2%. These figures also include the effect of retail price inflation. The June report showed retail prices lifted by a solid 0.9% in Q2, resulting in a 0.5% decline in underlying sales volumes.
Overall, retail sales have come under pressure as households have cut back discretionary spending amid falling real incomes and rising incomes; however, the July rebound suggests there is still a level of resilience evident in spending.