Australian retail sales volumes lifted by 0.3% in the December quarter - its strongest rise since Q2 2022 and above market expectations (0.1%) - as households took advantage of discounting during the Black Friday and Boxing Day sales. Retail price growth cooled to its slowest annual pace in 2 years; there have been small outright price declines in a few goods-related categories over the past year.
Black Friday and Boxing Day sales gave households some respite from cost-of-living pressures, generating a demand response in some areas of the retail sector. Sales volumes lifted by 0.3% in Q4 but have contracted by 1% through the year. Household goods (2.3%) drove the rise in quarterly volumes, with modest gains coming through for other retailing (0.4%) and department stores (0.2%). Basic food increased solidly (0.5%). These rises were moderated by falls in clothing and footwear (-1.6%) and cafes and restaurants (-2.1%), the latter seeing its sharpest quarter-on-quarter decline outside of the pandemic period in 13 years.
Retail price inflation slowed materially, reflecting the effects of sales discounting. The quarter-on-quarter pace of retail inflation eased from 0.6% in Q3 to 0.1% in Q4, its softest outcome since Q3 2021. At an annual pace, retail inflation eased from 3.7% to 2.4%, a low back to Q4 2021. Over the past year, prices have declined slightly across household goods (-0.5%), clothing and footwear (-0.7%) and department stores (-0.8%). While price rises for food (4.1%) and cafes and restaurants (5.1%) have declined from their highs, they remain at an elevated pace, reflecting higher costs associated with food production and overheads.
Aside from easing price pressures, retail demand has also been supported by population growth. Adjusting for this, retail volumes on a per capita basis declined 0.3%q/q (-3.5%Y/Y). This highlights the boost that population is providing demand, one reason why the labour market remains in robust shape.
