September jump in retail spending has made an RBA rate hike more likely

Retail spending sprang back to life in September as Australians used warmer than usual weather as an excuse to splurge on hardware, gardening and clothing.

Retail spending sprang back to life last month as Australians used warmer than usual weather as an excuse to splurge on hardware, gardening and clothing.

While the unexpectedly strong 0.9 per cent lift in monthly trade to $35.9bn – up from the 0.3 per cent growth in August – was good news for retailers leading up to Christmas, economists said it provided more evidence that the Reserve Bank would hike interest rates for a 13th time on Melbourne Cup day.

The largest lift in monthly ­retail trade since January flouted a generally depressed trend through most of the year, and boosted the year-on-year rate of growth to 2 per cent, from 1.6 per cent, according to the seasonally adjusted figures from the ­Australian Bureau of Statistics.

UBS chief economist George Tharenou said the latest figures “reinforces our view the economy is surprisingly resilient, and adds to the case to hike” next Tuesday.

“Indeed, if this continues, it adds to the risk of an additional RBA hike” in February.

Cafes and restaurants were the only segment to not record any lift in trade in the month, with gains led by a 1.7 per cent jump in department store sales, a 1.5 per cent rise in households goods ­retailing, and a 1 per cent increase in food retailing.

Department stores reported a rise in sales in September. Picture: Lyndon Mechielsen

ABS head of retail statistics Ben Dorber said the release of a new iPhone model and a Queensland rebate for the purchase of energy-efficient appliances also boosted the final figure.

But Mr Dorber said the underlying growth in retail turnover ­remained historically depressed.

“Retail turnover in trend terms is up only 1.5 per cent compared to September 2022, the smallest trend growth over 12 months in the history of the series,” he said.

Analysts believe retail volumes – after accounting for inflation – were 0.2-0.3 per cent higher in the three months to September following three quarters of declines.

Still, the bumper sales growth in the latest month only took retail sales back above the level ­recorded last November.

ANZ economist Madeline Dunk said “the fact that it has taken 10 months to get back to this level highlights the underlying weakness in the retail sector right now, particularly given the rapid pace of population growth”.

Since the November peak in overall sales, spending has climbed higher in food retailing and cafes, restaurants and takeaway services, the ABS figures showed, offset by much lower monthly spending in department stores, clothing and footwear, and household goods.

Australian Retailers Association chief executive Paul Zahra said the bumper September figures would give retailers “a cautious bit of optimism heading into these vital trading months”.

Mr Zahra called on the RBA to hold fire on another rate hike, saying the decision in a week’s time “will be pivotal to the success of retailers during the most important trading time of the year”.

“Discretionary retailers make up to two-thirds of their profits during the all-important Christmas period, so poor performance can be make or break, particularly for small business,” he said.

Retail turnover in September climbed 1.3 per cent in NSW and 1.2 per cent in Victoria, offset by substantially weaker growth of 0.5 per cent in Queensland and 0.1 per cent in Western Australia.