Australian retail sales increased by just 0.1% in April, underwhelming expectations for a modest rebound (0.2%) on the back of a weak print in March (-0.4%). A post-Easter moderation in households' spend on food and alcohol weighed down on the headline result as discretionary-related sales showed surprising strength.
April sales ($35.7bn) were up very modestly on the prior month, the overall increase of 0.1% falling short of the expected figure (0.2%). The earlier timing of Easter in 2024 boosted food sales in March (0.8%), helping to attenuate weakness from households cutting back on discretionary-related (non-food) purchases (-1.2%) that left headline sales down 0.4% month-on-month.
In April, this dynamic broadly reversed: food sales pulling back (-0.5%) and discretionary-related sales rebounding (0.6%). Around a volatile monthly profile, momentum in retail sales is soft rising by 1% through the first 4 months of the year; a result that could be described as weak in the context of the pace of population growth (around 2.5%). Inflationary effects are two-sided: on one hand, higher prices should weigh on spending as budgets become stretched but on the other, the higher prices being paid lift nominal sales.
Looking further into spending across the categories in April, the overall rebound in discretionary-related sales was driven by 'other' retailing (1.6%) and household goods (0.7%) - categories that had each declined in February and March. In addition, spending at cafes and restaurants (0.3%) and department stores (0.1%) also lifted. By contrast, clothing and footwear sales continued to fall (-0.7%) following a much larger decline in March (-4.6%). Food sales declined 0.5% in April - statistically their largest month-on-month fall going back to February 2022 - though the pullback may be accentuated by seasonal volatility given the earlier timing of Easter.
More volatility was evident in monthly sales in today's report, a common theme so far this year. But, overall, momentum in retail sales is soft (and weak in per capita terms), reflecting the pressures households are feeling from the higher cost of living and tighter monetary policy. This is the main dynamic that the National Accounts for Q1 should confirm next week, which appear likely to increase expectations for RBA easing in 2024.