Mastercard Spending Pulse survey shows retail trade up 25.1pc in August

The Reserve Bank’s five consecutive rate hikes since May have yet to lay a glove on consumers’ eagerness to spend on apparel, jewellery, travel and electronics.

Shoppers delivered Myer the best start to its financial year since 2006. Picture: Dan Peled.

The Reserve Bank’s five interest rate hikes since May have yet to lay a glove on shoppers who are continuing to spend on apparel, jewellery, travel and electronics, raising hopes for a strong Christmas for retailers.

But it does set up softer sales in 2023 as cost of living pressures finally hit.

The latest Mastercard Spending Pulse survey revealed retail trade increased 25.1 per cent in August compared to the same month last year, while sales rose 27.4 per cent compared to pre-pandemic levels.

Discretionary retail has recovered well from last year’s Covid impacts and lockdowns, with jewellery sales up 107 per cent in August compared to a year ago, apparel jumping 83 per cent, consumer electronics spiking 66.2 per cent and home furnishings lifting 51.6 per cent.

While spending on accommodation was up 131.5 per cent in August compared to 12 months ago, sales are down 5.5 per cent compared to three years ago, highlighting a strong bounce back from last year’s travel restrictions, but not quite a return to pre-pandemic levels.

Peak retail body Australian Retailers Association has welcomed the strong momentum for now, but cautioned there could be a slowdown in spending into 2023.

“In August last year, our two largest states were in lockdown, so it’s not surprising to see discretionary retail categories record such significant growth compared to 12 months ago. What’s pleasing though is that sales are also up compared to pre-pandemic levels across most retail categories,” said ARA chief executive Paul Zahra.

Rate hikes haven’t stopped shoppers yet. Picture: Nigel Hallett

“While consumer spending is strong for now, the concern is that we haven’t seen the full impact of the interest rate hikes hit household budgets.

“According to the government, inflation is also yet to reach its forecast peak, so we could see a softening of sales as we head into 2023.

“While the retail sector is performing well overall from a sales perspective, the results remain uneven with small businesses more acutely challenged by inflationary impacts and rising costs associated with fuel, energy, supply chains and rent,” he said.

The government’s fuel excise cut is also about to come to an end, adding further pressure to businesses and consumers.

“It’s incredible to see retail sales perform so well in the face of cost-of-living pressures, however the coming months could prove to be more challenging with household savings starting to erode and mortgage holders being squeezed even tighter,” Mr Zahra said.

Despite a string of interest rate hikes, designed to rein in spending, cool the economy and fight inflation, the consumer is continuing to splurge on goods and services as they celebrate the end of lockdowns and the easing of the pandemic.

Earlier this month, the Australian Bureau of Statistics released its latest report on household spending, which showed an 18.4 per cent lift in spending in July against the same time last year.

It was the 17th consecutive month of through-the-year increases in total household spending, with growth in all spending categories, led by clothing and footwear (up 45 per cent), transport (35.4 per cent) and hotels, cafes and restaurants (34.9 per cent).

Compared to pre-pandemic July 2019 estimates, total household spending was 11.9 per cent higher in current price, calendar adjusted terms, the ABS said.

The strongest increases over this period were in furnishings and household equipment (up 22.4 per cent), clothing and footwear (22.3 per cent) and recreation and culture (21.6 per cent).

At the recent reporting season, many retailers reported strong sales through July and August, pointing to what could be a strong Christmas season for the $400bn retail sector after years of interrupted trading caused by Covid-19 lockdowns and travel restrictions.

The nation’s largest department store owner Myer delivered a rosy trading update at the release of its full-year results last week.

It said momentum from January had continued into the first six weeks of fiscal 2023 with store sales up 74.8 per cent against last year and 21.8 per cent over pre-Covid levels.

The spending rush at Myer over July and August delivered the department store the best start to a new financial year since 2006.

It was a similar story for consumer electronics, furniture and appliances retailer Harvey Norman.

In August, the retailer reported sales at its Australian stores were up 10.7 per cent over July and August compared to the same two months in 2021.