‘Feeble’ retail spending as consumers even cut back on essentials
The latest data shows shoppers are cutting back drastically as cost-of-living pressures bite. Photo: TND
Australian consumers are cutting back on essential items, with the latest data revealing “feeble” retail sales.
Retail turnover rose just 0.2 per cent in August, despite robust population growth and ongoing increases in prices, Australian Bureau of Statistics (ABS) data published on Thursday showed.
Consumers have reduced spending on household goods (down 0.4 per cent) and even food (down 0.3 per cent) due to the cost-of-living crisis, although clothing and footwear outperformed with a 1.3 per cent rise in August – that is being attributed to a surge in demand for Matildas’ merchandise during the Women’s World Cup.
Oxford Australia head of macroeconomic forecasting Sean Langcake said that despite a rise in Matildas apparel sales there wasn’t “heaps to cheer about” in the August data
“It’s an unambiguously soft print,” he said.
“The level of spending has gone nowhere since September-October [last year] and if we get a similar print next month we will be looking at year-on-year growth of less than 1 per cent.”
Westpac senior economist Matthew Hassan said it was a “feeble” and “disappointing” result, with retail spending now exhibiting a “sizeable decline” in real (inflation-adjusted) terms.
The reasons for that are hardly surprising; the cost of living has soared over the past year as everything from groceries to utilities, petrol, rents and mortgage bills have gone up.
Indeed APAC economist Callam Pickering said that retail sales volumes have fallen over three straight quarters, with fewer families making fewer purchases each month on average.
“It highlights the extent to which household spending patterns have changed in response to cost-of-living pressures,” he said.
Langcake said lower food sales were particularly telling of the consumer weakness because population growth has been strong, suggesting families are cutting back even on essentials.
“You can’t do without food, but you can lower your grocery bill by substituting towards cheaper products on your weekly shop – I suspect there’s a good deal of that at play,” he said.
The retail data matches up with survey findings published earlier this week from Monash University that showed consumer pessimism about making big ticket purchases right now.
Half of shoppers told Monash they were financially worse off compared to a year ago, with two out of five (42 per cent) indicating it was a bad time for buys such as furniture, fridges and TVs.
That same survey also suggested consumers were cutting back on other non-essentials such as takeaway meals, saving their stretched budgets for essentials like insurance and health issues.
“Much of the consumer financial pessimism and changes in spending habits has been attributed to inflation and expectations of ongoing rate increases,” Monash’s lead researcher Stephanie Atto said.
“[That] will need to abate before any significant changes to consumer confidence can be seen.”
However, evidence shoppers are avoiding eating out wasn’t apparent in the August ABS data because, as explained by Commonwealth Bank economist Harry Otley, the FIFA Women’s World Cup convinced many people to spend.
“On an annual change basis, spending on cafes, restaurants and takeaway remains a clear standout (+8 per cent) as consumers prioritise services and experiences for their discretionary spend,” he said.
“Prices continue to rise briskly for restaurant and takeaway meals, which would also be contributing to the strong nominal spend.”