Nov retail turnover smashes market expectations ahead of RBA call

A surge in spending on household goods and at department stores has delivered retailers the best monthly sales result since pandemic restrictions lifted in 2021.

Black Friday spending on household goods and at department stores saw retail turnover jump more than expected in its biggest one-month increase in two years as consumers chase bargains amid a cost of living crunch.

Data from the Australian Bureau of Statistics (ABS), released on Tuesday, shows total retail turnover rose 2 per cent in November, compared to fall of 0.4 per cent in October.

The result nearly doubled the 1.2 per cent increase that markets had expected prior to the release of official data. It was also the best monthly result since November 2021, when retail sales lifted 5.8 per cent in response to the lifting of pandemic restrictions.

The period covers the popular Black Friday shopping period, which the Australian Retailers Association had forecast a $6.3bn spend over the sales period, up 3 per cent from 2022.

Australian households have been facing one of the worst cost of living periods in recent memory with inflation and interest rate rises from the RBA reducing discretionary spending power at the same time essentials such as power bills have gone through this week. This has seen shoppers increasingly chase products on sale and as a result helped to see retail turnover contract in October in preparation for the Black Friday shopping event.

It was more pronounced than the year prior when the sales period helped lift turnover by 1.4 per cent.

“The strong rise suggests that consumers held back on discretionary spending in October to take advantage of discounts in November. Shoppers may have also brought forward some Christmas spending that would usually happen in December,” ABS head of business statistics Robert Ewing said.

“The popularity of Black Friday events is affecting spending patterns in the lead up to Christmas. This causes more volatile monthly movements in seasonally adjusted data. We’ve released an article this month that explains how these changes are affecting the seasonality of retail turnover.”

All section of the retail industry saw gains in November, but spending on discretionary goods boosted by Black Friday sales that drove most of the increase.

Household goods retailing rose 7.5 per cent, followed by department stores at 4.2 per cent, clothing, footwear and personal accessory retailing (2.7 per cent); and other retailing (1.1 per cent).

In November, ARA chief executive Paul Zahra told The Australian that there was an increased chance that retailers who did not have a good sales period during Black Friday and Christmas could be closed by February.

“If a discretionary retailer doesn’t do well through Christmas, where up to two-thirds of their profits are made, it’s unlikely they’ll be around in February next year because they won’t have enough cash flow to sustain the winter months, where many lose money,” he said.

Capital Economics economist Abhijit Surya said that the increase largely appeared to be a one off with spending likely to weaken anew in December, which was unlikely to force the RBA to resume its tightening cycle in February.

“We’re sticking with our view that RBA won’t tighten policy any further. And if households tighten their belts as sharply as we think they will, the RBA could be cutting rates as early as May, which is sooner than most expects,” he said.

After an initial spike, the dollar was up by 0.2 per cent in afternoon trade to be buying US67.30c, while the S&P/ASX 200 was higher by 1.1 per cent to 7532.70.

South Australia saw the biggest monthly jump in retail turnover at 2.8 per cent, followed by Victoria and Queensland, while Tasmania was the weakest at 1.3 per cent.