The much anticipated collapse in household spending amid an intense cost of living crunch has been pushed back to another day, after new figures showed shoppers took advantage of discounts to send retail trade firmly higher in May.
The data from the Australian Bureau of Statistics revealed a 0.7 per cent lift in trade to total $35.5bn in the month, well above analysts’ forecasts for only a 0.1 per cent increase.
Australians were prepared to keep spending in cafes and restaurants despite sharply higher prices, with trade climbing by 1.4 per cent in the month to reach a record high and 13 per cent higher on a year earlier, according to the seasonally adjusted numbers.
There was a hefty 2.2 per cent lift in “other retailing” – a broad category of discretionary goods including books, toys, cosmetics and sporting goods.
ABS head of retail statistics Ben Dorber said the latest increase in retail trade numbers “reflected some resilience in spending with consumers taking advantage of larger than usual promotional activity and sales events for May”.
An early start to end of financial year sales events helped boost turnover, alongside Mother’s Day (online flower sales were strong) and the ‘Click Frenzy Mayhem’ sales event, Mr Derber said.
“Just as we saw during the November Black Friday sales last year, consumers appeared to take extra advantage of discounting during large sales events in May in response to cost-of-living pressures,” he said.
Major retailers are reporting customers had put an end to the free-spending period that accompanied a reopening economy, with
Harvey Norman forecasting sales in this financial year would be a third lower than in 2022.
But the latest ABS figures show there are enough Australians with money to keep the sector broadly ticking over for now, and to suggest the Reserve Bank
may need to keep hiking rates in order to cool demand – potentially as early as its next board meeting on Tuesday.
Still, with prices still climbing briskly, the growth in retail trade - which accounts for about a third of total household consumption - suggested Australians were spending more, but not necessarily buying more.
National accounts figures released earlier this month showed real - or after inflation - consumption slowed to just 0.2 per cent in the three months to March, and UBS chief economist George Tharenou said he expected an even weaker increase in the June quarter.
“The consumer - for now - is still weakening, but not collapsing,” Mr Tharenou said.