Australian retail sales volumes slid further in the June quarter as household demand continued to be weighed by higher interest rates and elevated inflation. Discounting for end-of-financial years sales boosted demand for clothing and footwear.
Retail Sales — June | By the numbers
- Retail sales reversed a 0.8% rise in May with a 0.8% decline in June to $35.2bn.
- 12-month retail sales slowed from 4.1% to 2.3%.
- Quarterly retail sales volumes contracted by 0.5% - in line with expectations - posting its third consecutive decline.
- Year-ended volume growth contracted by 1.4% from 0.3%.
- The retail price deflator printed at 0.9% in the quarter.
Retail Sales — June | The details
Headwinds from rising interest rates, cost-of-living pressures and weak sentiment continue to hit retail demand. Volume growth in retail sales contracted by 0.5% in the June quarter, which follows falls of 0.4% (Q4 2022) and 0.8% (Q1 2023). This is the weakest stretch for retail volumes since 2008. Despite weaker demand, retail turnover lifted by 0.4% in the quarter, reflecting prices rising by 0.9%q/q.
Most categories saw volume declines in the quarter. Clothing and footwear (1.1%) went against the trend, with the ABS attributing this to promotions and discounting for end-of-financial-year sales. Given this, discretionary (or ex-food) volumes saw a smaller decline (-0.4%) than the headline fall (-0.5%). Over the past year, household goods (-8.5%) has been the weakest category, likely reflecting a combination of factors from reduced housing market activity and spending patterns rotating to services post the pandemic.
Retail price inflation remained elevated but continues to ease, reflecting global disinflationary impulses from improved supply chains and weaker demand. The strongest price rises in the quarter were in food (1.4%) and (by association) cafes and restaurants (1.6%), with overhead cost increases also a factor for the latter. At the other end of the scale, clothing and footwear prices fell 1%q/q on the back of discounting.
Retail Sales — June | Insights
Weakness in retail demand extended to a third consecutive quarter, indicating RBA rate increases and high inflation are weighing on household consumption. Rapid population growth is pushing against these headwinds; in per-capita terms, retail volumes have contracted by 3.7% over the year (compared to -1.4% in headline terms). While retail demand has weakened substantially, services spending has remained more resilient.
