Jan 30, 2024: In a reversal from the previous month’s splurge, Australian retail sales dipped in December as shoppers exercised restraint, contributing to a slowdown in annual spending growth reminiscent of COVID-19 pandemic lockdowns. According to data from the Australian Bureau of Statistics (ABS) released on Tuesday, retail sales decreased by 2.7% on a seasonally adjusted basis, following a 1.6% rise in November driven by Black Friday bargains.
Analysts, anticipating a decline, were surprised by the extent of the drop, as December sales fell more than expected, recording a 2.7% decrease. Sales totaled A$35.2 billion ($23.27 billion), reflecting a meager 0.8% increase compared to the previous year, marking the slowest pace since August 2021 when COVID-related lockdowns impacted the country.
An annual growth rate of 0.8%, typically associated with recessions, is considered particularly weak, especially considering Australia’s rapid population growth. Ben Dorber, ABS head of retail statistics, noted that the underlying retail spending remains subdued when accounting for the volatile movements leading up to Christmas.
The strain on household budgets has raised expectations in financial markets that the Reserve Bank of Australia will likely refrain from raising interest rates in the upcoming policy meeting. The pressure on consumers, coupled with elevated living costs and high mortgage payments, has prompted a curtailment in spending on discretionary goods.
While interest rates have reached a 12-year high of 4.35% since May 2022, consumers may find relief in the second half of the year with reworked tax cuts. The Australian dollar remained relatively stable at $0.6620, and three-year bond futures experienced a slight uptick.
As the market anticipates the Reserve Bank’s decision, the much-awaited four-quarter inflation report, scheduled for Wednesday, is expected to reveal a headline consumer inflation easing to a two-year low of 4.3%. This further reinforces the belief that interest rates may not require additional upward adjustments.