‘Not a sign of strength’: Aussies spending spree sign of household weakness

End-of-financial-year sales and Australians flocking to one electrical item have triggered an unexpected retail boom.

Bargain-hunting Australians and the arrival of the new Nintendo Switch unexpectedly bumped retail sales in June, but it might not be a sign of a strong national economy.

Retail sales surged 1.2 per cent in June, according to the Australian Bureau of Statistics, the biggest monthly jump since November 2021 when Aussies flocked to stores post Covid lockdowns.

While this smashed expectations that retail sales would grow by 0.4 per cent in June, AMP economist My Bui said the figures were quite tepid.

“The strong June result has benefited from one-off releases and promotions, which is not necessarily a sign of strength,” Ms Bui said.

KPMG chief economist Brendan Rynne also said the surge in spending showed Australians were still under financial pressure.

The highly anticipated launch of the Nintendo Switch 2 helped boost consumer spending. Picture: Supplied

“As cost-of-living pressures continue, households are very much vying for bargains wherever they can, with sale items now consuming a far larger portion of our spending compared to just a few years ago,” Dr Rynne said.

“This month’s results show despite a lift in household savings in the first quarter of the year, families have sought to tighten their belts further to ensure they’re getting the biggest bang for their buck and only buying items they absolutely need, unless it’s a one-off purchase.”

Mr Rynne said even factoring in the surge in retail trade on Thursday, volumes still remained sluggish over the quarter.

KPMG points out that on a per capita basis, retail volumes fell 0.1 per cent in the June quarter after falling 0.4 per cent in the previous quarter, reflecting ongoing restraint in consumer spending.

Compared with the same time last year, retail volumes per capita are down 0.1 per cent and are now 6.0 per cent below the June 2022 quarter peak.

But zooming out, KMPG says this is still 3.2 per cent higher than the pre-pandemic level recorded in the December 2019 quarter.

ABS head of business statistics Robert Ewing said the spike in retail sales was largely driven by end-of-financial year sales and the launch of the latest Nintendo video game console.

A large driver of consumer spending was the new Nintendo Switch. Picture: NewsWire / John Appleyard

“Consumers are targeting sales events with a focus on value for big-ticket items like household furniture, bedding, electronic devices and TVs,” Mr Ewing said.

“Turnover for electrical and gaming retailers was lifted further by the much-anticipated launch of the Nintendo Switch 2, which delivered record sales.”

Spending for the month was driven by non-food related purchasing, led by household goods retailing (up 2.3 per cent) and other retailing (up 1.9 per cent).

There was also a strong bump in department store sales (up 1.9 per cent), and clothing, footwear and personal accessory retailing, which jumped 1.5 per cent.

The other key spending driver was end-of-financial-year sales. Picture: NewsWire / Nicholas Eagar

The ABS says this jump was due to end-of-financial-year sales of winter clothing items.

Food-related spending also rose after a fall last month.

While food retailing bounced back 0.9 per cent, spending in cafes, restaurants and takeaway food services fell 0.4 per cent.

Oxford Economics Australia head of economic research and global trade Harry Murphy Cruise said retail trade data created the perfect trifecta for an August rate cut.

“Just as the RBA looked through the noise in monthly measures of consumer prices, the board will do the same for June’s higher-than-expected retail sales print,” he said.

“It’s the trend that matters, and on that front, the trend of soft retail sales, labour market weakness and easing inflation make a perfect trifecta for an August rate cut.”

Originally published as ‘Not a sign of strength’: Aussies spending spree sign of household weakness