By James Glynn
Australian retail sales experienced a significant decline in December, with all major categories seeing falls. This downturn highlights the mounting pressure on household budgets due to elevated interest rates and inflation driving up the cost of essential items.
According to the Australian Bureau of Statistics, retail turnover dropped 2.7% in December compared to November, surpassing economists’ expectations of a 1.0% fall.
This decline follows a revised increase of 1.6% in November, as consumers capitalized on Black Friday sales towards the end of the month.
The major decrease in retail turnover can be attributed to a decline in discretionary spending, despite a substantial increase in migration over the past year and the impact of rising prices on turnover figures.
Sean Langcake, Head of Macroeconomic Forecasting at Oxford Economics Australia, said, “Retail volumes are likely to have remained stagnant in the quarter. The underlying trend in consumer spending remains weak, particularly for discretionary items. Tighter policy settings are curbing demand, and retail sales growth in the first half of the year is expected to be inconsistent.”
This significant drop in sales will play a crucial role in shaping the Reserve Bank of Australia’s first policy meeting on February 6, as it strongly argues against further interest rate increases. Financial markets are already starting to factor in the possibility of interest rate cuts by the RBA in the latter half of this year.
“The shift in spending from December to November reflects the growing popularity of Black Friday sales and the impact of cost-of-living pressures. Consumers are actively seeking out bargains and taking advantage of discounts in November,” stated the ABS.
In terms of specific categories, household goods retail sales witnessed an 8.5% decline in December, while department store sales dropped by 8.1%. Clothing, footwear, and personal accessory retail sales also fell by 5.7% in December, with other retail sales easing by 1.1%, according to the data.