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NSW, Victoria lead retail spending slump after earlier splurge

Retail turnover in Australia declined by 0.4 percent in March 2024, according to the latest data from the Australian Bureau of Statistics (ABS).

This decrease follows a 0.2 percent rise in February and a 1.0 percent increase in January of the same year.

Ben Dorber, Head of Retail Statistics at the ABS, attributed the decline to ongoing pressure from high living costs, which led consumers to scale back their spending on retail goods. He noted that underlying retail turnover has remained stagnant for the past six months, with only a 0.8 percent increase compared to March 2023. This growth is notably the weakest on record outside of extraordinary circumstances like the pandemic and the introduction of the GST.

The decline in turnover was observed across most industries, except for food retailing, which saw a slight increase of 0.9 percent. The largest decreases were in clothing, footwear, and personal accessory retailing, which dropped by 4.3 percent, and department stores, which fell by 1.6 percent. Dorber mentioned that the surge in turnover for fashion and accessory retailers seen last month, possibly influenced by events like Taylor Swift concerts, was short-lived and reversed this month.

Other sectors experiencing declines include household goods retailing (-1.4 percent), other retailing (-0.3 percent), and cafes, restaurants, and takeaway food services (-0.2 percent).

The decline in retail turnover was particularly pronounced in New South Wales (-1.1 percent) and Victoria (-0.8 percent), driven by reduced spending following previous increases, notably associated with the Taylor Swift concerts. However, other states and territories saw more modest changes.

Dorber emphasized the importance of examining quarterly retail sales volumes to understand the impact of consumer prices on recent turnover growth, with further data set to be released next week.

The ABS plans to provide additional information on the March reference period, including quarterly price and volume data, on May 7, 2024. They expressed gratitude to businesses for their ongoing cooperation in responding to surveys.

Anneke Thompson, CreditorWatch Chief Economist said: “Today’s retail trade figures underline just how cautious Australian consumers are being with their spending. Retail trade fell 0.4 per cent on a month-on-month basis and was only 0.8 per cent higher on a year on year measure. Spending on food retailing is the only category that increased on a monthly basis, and the only category showing any consistent rise in spending through the year. This is mostly due to population growth. Australian consumer spending has remained virtually unchanged since late 2022, when consumers really started to feel the effects of rapid increases to the cash rate.

“Spending on household goods is particularly weak. Australians spent less in this category this month than they did in October 2021, despite rapid population growth since that time. Household goods spending is heavily impacted by housing completions, and as these are declining due to very low building approvals and commencements, spending in this sector is likely to remain subdued for some time.

“In more positive news for borrowers, today’s retail spending figure will be a relief to the Reserve Bank of Australia (RBA) and reduce the threat of sticky inflation, at the very least in the goods category. Spending on services is still driving inflation, however services spending is less impacted by monetary policy. The RBA can take comfort that their tightening measures are helping drive down inflation. However, this will be of little comfort to businesses in the retail trade, food and beverage and construction sectors, where default and external administrations are on a rising trend.”

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Yajush Gupta

Yajush Gupta

Yajush is a journalist at Dynamic Business. He previously worked with Reuters as a business correspondent and holds a postgrad degree in print journalism.

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