Australian retail sales rose 0.2% for May, an underwhelming outcome relative to expectations (0.5%) coming off a flat month in April (revised from -0.1%). Sales were driven by the fastest rise in the clothing and footwear category since early last year (2.6%) after households had deferred winter clothing purchases. This offset weakness across other categories, but momentum in retail sales is weak as cautious households remain reluctant to spend. The report adds to the case for the RBA to lower rates next week.
National retail sales lifted by 0.2% month-on-month in May to $37.3bn, the level up 3.3% on 12 months ago but down from a 3.8% pace last month. Although inflation has eased significantly and the RBA has cut rates twice this year, the higher cost of living and weak sentiment have been keeping households quiet. Sales growth has averaged just 0.1% across the past 3 months.
At the category level, clothing and footwear sales accelerated by 2.9% in the month - its strongest rise since February 2024 - after warmer weather saw households delaying winter clothing purchases. This had the effect of holding up headline sales growth against outcomes that were either flat or negative in the other categories (see table above). It also led discretionary sales (0.6%) to post their fastest rise in 6 months. But, overall, this was a weak report consistent with households remaining constrained.
Sales growth across the states has been volatile month to month in 2025, as shown in the chart below. In the two largest states of New South Wales and Victoria, sales were up 0.1% and 0.2% respectively - very modest rebounds in the context of their declines in April (NSW -1% and Victoria -0.4%). Sales in Queensland stabilised (0.1%) from the post-cyclone rebound in April. Meanwhile, sales momentum in Western Australia remains the strongest of all states rising by a further 0.7% in May, their 7th consecutive rise.
