Australian retail sales declined by 2.7% in December (vs -2% consensus) as spending pulled back following the Black Friday sales in the prior month. The Bureau revised the surge in November sales down from 2% to 1.6%, but that is still the fastest month-on-month lift in 2 years. Retail spending cooled materially over 2023 - annual growth has slowed to 0.8% from a 7.6% pace 12 months ago - reflecting cost-of-living pressures and the rebalancing of spending patterns post the pandemic running its course, rotating from goods to services.
The decline in retail sales following the Black Friday sales was larger in 2023 than in recent years. December sales fell by 2.7% in 2023 compared to declines of 1.3% in 2022 and 1.4% in 2021 and 2020. However, it also needs to be considered that Black Friday in 2023 gained significant traction with households; sales surged by 1.6% in November, posting their fastest increase in 24 months.
Although momentum in retail spending is weak - quarterly sales lifted by just 0.5% - the immediate bounce Black Friday was able to generate is an indication that households - particularly those with excess savings - can still be encouraged to spend despite the pressures they are facing. To this point, the ABS noted in today's release that retailers reported that conditions picked up as discounting returned in the lead-up to Christmas and through the Boxing Day sales.
Following a sharp 2.6% rise in November, spending in the discretionary categories fell by 4.5% in December, driving the unwind in retail sales. The categories that saw their strongest increases through Black Friday posted the largest declines in December: household goods -8.5%m/m (from 6.5% in November); department stores -8.1% (from 4.1%); and clothing and footwear -5.7% (from 2.2%). Cafes and restaurants saw clear a slowdown into year-end, declining 1.1% in December to be down for the 4th month in succession.
As mentioned, quarterly sales lifted by 0.5% in Q4. That result is in line with Q3, which in inflation adjusted or volume terms equated to a 0.2% rise. The ABS will publish volume and price data for Q4 in a more detailed release next week.