Australian retail sales surprised on the upside of expectations posting a 0.7% lift in August (vs 0.4% forecast), the strongest gain since the start of the year. The ABS pointed to a warm finish to the winter and the early timing of Father's Day as the contributing factors. Although households remain under pressure from the cost of living and higher interest rates, sales increased by 3.1% across the year, the fastest pace since May 2023.
Retail sales rose by 0.7% in August following a soft result in July (0.1%). This was the strongest gain for monthly sales since January. Over the 3 months to August, retail sales averaged a 0.4% increase, a modest pace but an improvement on the momentum in recent times.
In the latest month, discretionary spending (0.8%) played a key role in the rise in the headline figure. Meanwhile, food sales (0.6%) were also solid. The ABS noted in today's release that unusually warm weather pulled Spring spending forward, boosting categories such as clothing and footwear (1.5%), liquor (2.8%), recreational goods (2.4%) and cafes and restaurants (1.0%). Spending in August was also supported by the timing of Father's Day, which fell on September 1.
Spending growth was strong across most states in August. Gains of 0.7-0.9% were seen in New South Wales, Victoria, Queensland and Tasmania, but South Australia (0.3%) and Western Australia (0.4%) underperformed. Annual growth in the two largest states (NSW and Vic) is running in the 2-3% range, up from the lows earlier in the year but still subdued.
