Australia’s retail sales gain in March driven by food inflation
AUSTRALIAN retail sales rose for a third straight month in March, driven primarily by food inflation, as household spending begins to cool under the weight of the Reserve Bank of Australia’s (RBA) aggressive interest-rate increases.
Sales advanced 0.4 per cent from a month earlier, compared with a forecast 0.2 per cent gain, Australian Bureau of Statistics data showed on Wednesday (May 3). Every category outside of food and eating out recorded a decline.
“Spending on non-food retailing has slowed in response to interest rate rises and increased cost of living pressures,” Ben Dorber, ABS head of retail statistics, said in a statement. “Food retailing has now recorded 13 consecutive monthly rises, largely driven by high food inflation.”
The result suggests consumers are beginning to hunker down in the face of rising borrowing costs, in line with the central bank’s aim. The RBA unexpectedly tightened policy on Tuesday to take the cash rate to 3.85 per cent from a record-low 0.1 per cent a year earlier in an effort to ease price gains.
Retail sales are a key input for the RBA’s rate decisions as private consumption accounts for roughly 60 per cent of gross domestic product. Resilient consumers have been a major factor in policymakers’ confidence that the economy can withstand higher rates.
Earlier Wednesday, consumer electronics retailer JB Hi-Fi reported a slowdown in same store sales in the third quarter from a year earlier. Its household goods retailing unit posted a larger 3.8 per cent drop in a sign Australians are reining in spending.
Bloomberg Economics expects weakness in 2023 as the full impact of policy tightening passes through to household budgets. Elevated inflation and higher borrowing costs have already battered consumer sentiment while the re-emergence of overseas travel threatens to shift more spending offshore.
The RBA is predicting a cooling in spending, estimating consumption growth of 1.7 per cent by end-2023, down from a 7.5 per cent gain in 2022. BLOOMBERG
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