Retail turnover slows in August as households continue to pullback amid cost of living crunch

While Australians spent more money on clothing and eating out in August, retail turnover on trend terms has fallen to its lowest annual growth on record.

Retail turnover has risen by the smallest amount annually on record — outside of the pandemic — as Australian households continue to batten down the hatches against cost of living pressures stemming from inflation and interest rates.

Data from the Australian Bureau of Statistics (ABS) shows total retail turnover rose 0.2 per cent in August compared to 0.5 per cent in July.

The result undershot market expectations of a 0.3 per cent gain.

It reconfirmed widespread market consensus that the Reserve Bank will leave rates on hold at 4.1 per cent next week, despite monthly inflation climbing to 5.2 per cent in August.

KPMG chief economist Brendan Rynne said the modest retail growth seen in August reflects consumers continuing to tighten their belts.

“The subdued retail figures will give more ammunition for the RBA to hold rates next week, following the high petrol prices highlighted in Wednesday’s CPI figures, which have the effect of pulling back aggregate demand across the economy,” Dr Rynne said.

“The broad impact of high fuel prices, combined with weak retail sales would seem to indicate a further rate pause on Tuesday.”

Retail sales seasonally adjusted were up 1.5 per cent in the past 12 months, which was the lowest since the August 2021 lockdowns. On a trend metric, which smooths out volatile periods, retail turnover was 1.3 per cent higher from a year ago — the smallest trend growth over 12 months in the history of the series.

“Considering how high inflation and strong population growth has added to retail turnover in the past year, the historically low trend growth highlights just how much consumers have pulled back in response to cost-of-living pressures,” ABS head of retail statistics Ben Dorber said.

AMP chief economist Shane Oliver said while retail figures were measured in nominal terms and with inflation still high, AMP estimated that real retail sales were in fact down 2 per cent from August 2022.

“With population growth running around 2.5 per cent, retail sales per person are actually down 1 per cent year-on-year, and real retail sales per person are down around 4.5 per cent year-on-year.

“September quarter real retail sales are on track for their fourth quarterly fall in a row, highlighting the pressure on households from interest rate hikes and cost of living pressures.”

Clothing, footwear and personal accessories recorded the largest rise in August to be up 1.3 per cent, followed by a 0.7 per cent increase for cafes, restaurants and takeaway food services, while department stores recorded a 0.4 per cent jump, which was down on 3.7 per cent in July.

“Warmer than usual weather and additional promotional activity linked to Afterpay Day lifted spending on discretionary goods, especially clothing, footwear and personal accessories,” Mr Dorber said.

“Spending was again boosted by the 2023 FIFA Women’s World Cup, with strong demand for fan gear and increased spending across cafes, restaurants and takeaway food outlets as large crowds attended matches and live sites across the country.”

Household goods retailing recorded a third consecutive fall to be down 0.4 per cent and the ninth monthly fall in turnover in the past 12 months. Food retailing fell 0.3 per cent amid a continual easing in food inflation.

Western Australia registered the strongest growth among the states at 0.5 per cent, followed by Victoria and Queensland, while NSW was flat and South Australia and Tasmania saw a contraction in spending.