Australian retail sales rose solidly for the second month in succession up by 0.5% in June (vs 0.2% expected) as end-of-financial-year sales continued to drive spending. However, quarterly volumes still contracted by 0.3%, highlighting that household demand remains weak amid cost-of-living pressures and higher interest rates.
Nominal retail sales lifted by 0.5% in June following increases of 0.6% in May and 0.2% in April. This amounted to a 0.7% rise in retail turnover across the June quarter, the strongest quarterly rise since Q4 2022. Despite promotions and discounting during end-of-financial-year sales, retail prices still increased during the quarter seeing a 0.9% rise (2.6% year-on-year). As a result, inflation-adjusted sales (or volumes) contracted by 0.3% for the quarter and by 0.6% through the year, painting a picture of weak demand as households have been forced to cut back due to the higher cost of living and to meet increased mortgage repayments.
The key details for quarterly volumes showed weakness across categories including food (-0.9%), clothing and footwear (-1.7%), department stores (-0.8%) and cafes and restaurants (-0.7%). There were increases in volumes for household goods (1.3%) - the ABS highlighting a boost in items such as furniture, bedding, TVs and laptops - and from 'other' retailing (0.9%).
Retail price inflation (0.9%) posted its strongest quarterly rise since Q2 2023; however, the annual rate has remained steady around a 2.5% pace over the past few quarters. This is still a relatively elevated pace in a historical context but is down substantially from the peak in late 2022 (7.4%).
