Total retail sales inched up by 0.1% month-on-month on a seasonally adjusted basis to $35.7 billion in April off the back of weak spending. The market had pencilled in a 0.2% growth. 

Today’s read follows a sharper 0.4% fall in March and a 0.2% lift in February. 

“Underlying retail spending continues to be weak with a small rise in turnover in April not enough to make up for a fall in March,” ABS head of retail statistics Ben Dorber said. 

While there was a bit of payback from the previous month’s fall, the current pace of growth has only brought the year-on-year figure up to a sluggish 1.3%. 

This is considered weak if the population growth, which is expanding by more than 2% a year, is factored in. 

“This highlights the current pressures facing the retail sector as households limit spending in response to cost of living pressures,” ANZ senior economist Blair Chapman noted. 

Seasonal factors impact retail figures 

Similar to the other measures recorded in the same period, the early Easter and different timing of school holidays across the country added some volatility to the turnover data in March and April, according to the ABS.

In trend terms, which remove seasonal factors, retail sales were flat (0.0%) in the month prior. 

“Since the start of 2024, trend retail turnover has been flat as cautious consumers reduce their discretionary spending,” Mr Dorber said. 

Non-food related industries largely drove the slight uptick in April retail trade figures. 

Other retailing – which includes recreational goods, pharmacy and cosmetics, and online-only operators – had the largest rise (up 1.6%) this month, followed by household goods (up 0.7%), and department stores (up 0.1%).

The largest contributor to the soft outcome was dood retailing, down 0.5%, which accounts for 40% of retail sales. 

The ABS suggests that the earlier-than-usual Easter boosted food retail spending in March, particularly on alcohol, leading to the partial reversal in April.

While today’s read offered a peak into the latest consumption dynamics in the country, we will get a broader accounting including services spending in early 2024 in the first quarter GDP due next week. 

“We expect the Q1 national accounts to show another quarter of subdued consumption growth overall, in the range of 0.1-0.2% quarter-on-quarter,” NAB senior economist Taylor Nugent said. 

According to Mr Nugent, today’s data suggests retail volumes may continue to drag on still sluggish overall consumption in the second quarter of the year. 

“Looking ahead, we continue to expect household consumption to strengthen gradually through the second half of 2024 and into 2025.”

What will the RBA think about the spending data?

The soft spending data is expected to keep the RBA confident in its measures to reduce excess demand and lower inflation. 

The RBA has been adamant in keeping its tightening bias as long as inflation doesn’t return to its ideal range of 2% to 3%. 

The inflation rate currently stands at 3.6% over the year, following a strong 1% rise in the March quarter. 

The stubbornness of services inflation is the major reason the Reserve Bank’s rate-setting committee has refrained from lowering Australia’s benchmark rate in previous policy meetings. 

The last two retail trade reads have indicated Aussie consumers have substantially pulled back on their end of the bargain, which is goods inflation, and is even weaker when population growth is taken into account. 

And whether the four major bank economists are correct in saying the RBA will commence the easing cycle in November or that rates will rise further as Judo Bank’s Warren Hogan forecast, hinges on where inflation will land. 

The ABS will release its consumer price index (CPI) read for April tomorrow, and market watchers expect a small dip in the annual rate to 3.4%. 

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