Swift reversal: Shoppers shun spending through March as inflation bites on budgets

Despite expectations of a robust rise, shoppers shunned new spending last month after a Taylor Swift-inspired boost.

Shoppers kept their wallets shut last month, shunning spending on clothing, footwear, household goods and in department stores, to erase the recent rise in retail turnover buoyed by Taylor Swift-inspired spending.

According to fresh data released by the Australian Bureau of Statistics on Tuesday, retail spending slipped 0.4 per cent in March, well short of economists’ expectations of an 0.2 per cent increase.

Consumers spent $151m less in March than the month prior, bringing total turnover to $35.7bn, the seasonally adjusted figures showed.

Turnover fell across all industries except for food retailing, up 0.9 per cent, with the largest fall recorded in clothing, footwear and personal accessory retailing, down 4.3 per cent.

“The Taylor Swift-inspired boost in turnover for fashion and accessory retailers last month has proved to be temporary with an instant reversal this month,” ABS head of retail statistics Ben Dorber said.

Oxford Australia’s head of macroeconomic forecasting Sean Langcake said the underlying trend remained “very weak” with annual growth up just 0.8 per cent — the weakest result since 2000 outside the pandemic and the introduction of the GST.

“Considering the brisk pace of population growth, this is a very soft trend,” Mr Langcake said.

“Strong price inflation for essentials like health and education and higher rent and mortgage costs are still putting the squeeze on household budgets and discretionary spending.”

Retail spending through March was far weaker than economists had predicted. Picture NCA NewsWire / Emma Brasier

While hot inflation data released over the March quarter spurred bets that the RBA would hike interest rates, the softer-than-expected data shows consumer demand remains weak and adds to the consensus view the central bank will not resume its monetary tightening.

“Labour market cooling and progress on inflation haven’t gone the RBA’s way as quickly as they had expected in February, but sluggish consumer demand growth will continue to give the RBA confidence they are making progress reducing excess demand,” NAB senior economist Taylor Nugent said.

Economists believe households have spent much of their pandemic-era savings buffers and are feeling stretched by still persistent inflation, particularly in the labour-intensive services sector.

However, an uptick in consumer spending through 2024 is expected as tax relief bolsters household budgets and easing inflation supports purchasing power.

“As the recovery in households’ real incomes continues, we suspect that consumer spending will also gain momentum,” Capital Economics’ Abhijit Surya said.

Originally published as Swift reversal: Shoppers shun spending through March as inflation bites on budgets