Unwavering Australian retail sales emboldens the RBA for another 50 bps hike

Wed 28 Sep 22, 1:03pm (AEST)
Blurry picture of a busy mall escalator with lots of shoppers
Source: iStock

Key Points

  • Australian retail sales rose 0.6% month-on-month in August compared to expectations of a 0.4% rise
  • Food-related segments led the rise, while discretionary segments varied in performance
  • Still solid retail spending will likely support another 50 bps rate hike from the RBA, according to ANZ

Australian retail sales increased more than expected in August, suggesting consumers are still keen to spend despite higher interest rates, which are expected to moderate demand and economic growth.

Retail sales rose a seasonally adjusted 0.6% month-on-month in August and up 19.2% compared to a year ago. This marks the eight consecutive rise following a 1.3% increase in July and 0.2% rise in June.

Australia Retail Sales MoM - August 2022 Data
Source: TradingEconomics

ABS insights

“This month’s rise was driven by the combined increase in food related industries, with cafes, restaurants and takeaway food services up 1.3 per cent and food retailing up 1.1 per cent," said Ben Dorber, Head of Retail Statistics at the ABS.

“While households continue to spend, non-food industry results were mixed and only contributed a small amount to the total rise in retail turnover.”

"Department stores rose by 2.8 per cent to a new record level, while household goods retailing had its largest rise since March 2022, up 2.6 per cent, having recorded three falls in the previous four months," the ABS report said.

However, 'other retailing' fell for the first time in five months, down -2.5%. Clothing, footwear and personal accessory retail also recorded a steep decline, down -2.3% after two consecutive rises.

ANZ: Strong start to September

ANZ Bank observed still-solid spending in September, with daily average spending excluding petrol up 1.5% month-on-month.

ANZ consumer spending
Source: ANZ Research

The rise was supported by "solid discretionary spending" with a notable 5% month-on-month increase in shopping.

"Electronics and hardware spending were especially strong," ANZ said in a report last week.

Dining and takeaway spend also rose 1% month-on-month, a continuation from the strength observed in the ABS' August data.

Although, the bank said it was beginning to see mixed signals for "bigger ticket purchases", with furniture spending down -3% month-on-month.

"This suggests households may be starting to cut back on bigger ticket durable purchases, or it could reflect the slowdown of transactions in the housing market, which are a common trigger for furniture sales," the analysts said.

The bigger picture

The RBA has repeatedly said that the size of future interest rate increases will be guided by incoming data, especially household spending.

ANZ analysts expects buoyant data such as the NAB Business Survey and US CPI report to "reinforce the case for the RBA to hike another 50 bp in October."

"We think spending will eventually slow as rate hikes eat into household budgets, but this has not happened yet."

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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