October retail spending sinks as shoppers held off for Black Friday sales

Shoppers held off on purchases in October ahead of the much anticipated Black Friday sales, fresh retail spending data has confirmed.

Australian retail spending sank in October as consumers, weighed down by the continued cost of living crunch, held off spending to take advantage of the November Black Friday sales.

The fresh data for October, released by the Australian Bureau of Statistics on Tuesday, showed retail turnover sank 0.2 per cent, falling short of market expectations for an increase of 0.1 per cent.

In total, consumers spent $35.8bn in October, $57m less than the month prior, according to the seasonally adjusted figures.

While retail spending was 1.2 per cent higher than a year earlier, annual growth has dwindled to just half the rate recorded prior to the pandemic as the RBA’s punishing round of rate hikes weigh on household budgets.

With bargains to be had at the Black Friday sales, shoppers held off retail spending in October, the ABS said. NCA NewsWire/ Dylan Robinson

ABS head of retail statistics Ben Dorber said the retail data showed consumers had “hit the pause button” on some discretionary spending in October, as they waited for the Black Friday sales events in November.

“This is a pattern we have seen develop in recent years as Black Friday sales grow in popularity,” Mr Dorber said.

Reflecting the delay until the Black Friday sales period was the decline in spending during October for clothing and footwear, which dropped 1 per cent.

Spending on household goods and in department stores also sank 0.6 per cent.

The surge in hospitality spending experienced after pandemic-era lockdowns lifted appeared to have ended with consumer spending at cafes, restaurants and bars declining for a second consecutive month.

Food retailing was the only sector to post a rise in October, up 0.5 per cent.

Economists said the decline in retail spending would further encourage the RBA to keep rates steady in December. Picture: NCA NewsWire / Jeremy Piper

With the Reserve Bank board set to meet for a final time this year on December 5, economists said the retail figures would not add to the case for a pre-Christmas rate hike.

ANZ economists Madeline Dunk and Adelaide Timbrell said momentum in the sector remained weak but would slowly rise as inflation eased.

“The clear weakness in the retail sector highlights the ongoing squeeze on household budgets and supports the case for the RBA to keep the cash rate on hold at its December meeting,” they said.

“While retail sales should receive a sugar hit from Black Friday and Cyber Monday sales in November, we expect the underlying trend in the series to remain weak.

“As we move into 2024, the rise in real household incomes should support retail sales.”

Retailers Association boss Paul Zahra said retailers were suffering following a wind-back in discretionary spending. Picture: NCA NewsWire / Monique Harmer

Tapas Strickland, head of market economics at NAB, agreed that while the RBA would likely pause at its December meeting, it would hike interest rates by a further 0.25 per cent in February.

Australian Retailers Association chief Paul Zahra said shoppers were increasingly feeling the crunch of the cost-of-living crisis and interest rate increases, making it a challenging time to be a discretionary retailer.

“October’s underwhelming results also came amid the Reserve Bank of Australia’s last interest rate pause,” Mr Zahra said.

“We expect retail sales will be impacted even more by November’s interest rate hike.”