Shoppers around Pitt Street Mall on June 7, 2022 in Sydney, Australia. Australian retail sales beat expectations again in May as consumers spent more on food in restaurants and department stores, suggesting demand is proving resilient amid rising inflation and rising interest rates.
Brendon Thorne | News from Getty Images | Getty Images
Australian retail sales beat expectations again in May as consumers spent more on food in restaurants and department stores, suggesting demand is proving resilient amid rising inflation and rising interest rates.
Retail sales rose 0.9% in May, the fifth consecutive month of growth and doubled market forecasts of 0.4%, data from the Australian Bureau of Statistics showed on Wednesday.
Sales rose to a record A$34.2 billion (US$23.64 billion), up a whopping 10.4% from May last year, although some of that can be attributed to an increase in prices rather than volumes is.
“Higher prices contributed to retail sales growth in May,” said Ben Dorber, ABS director of quarterly macroeconomic statistics. “This was most evident in cafés, restaurants and take-away sales, as well as in food retail.”
Spending on dining out rose 1.5% for the month, while department stores saw sales jump 5.1%.
This resilience supports the Reserve Bank of Australia’s (RBA) confidence that consumption can withstand higher borrowing costs. The central bank has already hiked rates twice since May and is expected to hike again at its July monetary policy meeting next week, likely by 50 basis points to 1.35%.
Policymakers are hoping a 50-year low unemployment rate and some A$260 billion in excess savings accumulated by households during the pandemic will support demand.
However, real incomes will be depressed as inflation far outpaces wages while property values fall. Energy costs have skyrocketed recently and widespread flooding has sent vegetable prices skyrocketing.
Analysts at Goldman Sachs believe consumer price inflation could peak at 8% in the third quarter, a 32-year high and even higher than the RBA’s upwardly revised forecast of 7.0%.
The RBA has stressed that it is uncertain how consumers will fare, one reason investors have scaled back expectations of the rapid rise in interest rates. In the markets, the 0.85% cash rate is 3.25% by the end of the year, compared to 3.75% a few weeks ago.
“The RBA’s rate hikes themselves will weigh directly on disposable incomes by sharply increasing interest payments by households,” warned Paul Bloxham, head of Australia economics at HSBC, who expects house prices to fall by 14% over the next 18 months .
“While not our central case, high inflation and rising interest rates mean there is a growing risk that Australia’s economy faces a recession over the next 12 to 18 months.”
https://www.cnbc.com/2022/06/29/australias-retail-sales-beat-forecasts-again-in-may.html Australia’s retail sales again beat forecasts in May