Retail sales still strong despite rising prices

  • By Zilla Efrat

Australian retail sales volumes rose 1.4 per cent in the June quarter, touching a new record level despite rising inflation, according to the Australian Bureau of Statistics (ABS).

This was the third consecutive quarterly rise in the total volume of retail trade, following rises of 1 per cent in the March quarter of 2022 and 7.7 per cent in the December quarter of 2021.

Benefitting most were industries recovering from slowdowns during the Delta lockdowns.

“Despite all the talk about a ‘cost of living crisis’, Aussie consumers are buying more goods and services,” says Craig James, CommSec’s chief economist.

Excluding price changes, he says the spending rise is ahead of the “normal” or decade average quarterly lift of 0.7 per cent.

“Of the 15 detailed spending categories, real spending rose in nine over the June quarter, led by cafes and restaurants (up 10.3 per cent),” says James.

“Over 2021/22 as a whole, again cafes and restaurants led the way with real spending up 16.3 per cent, while at the other end of the scale real spending on newspapers and books fell 12.2 per cent.

“The year 2021/22 was the year that Aussies went out again. In both real and nominal terms, Aussies spent more at cafes and restaurants than ever before.”

 “Sales volumes continued to rise into the June quarter, despite the largest rises in retail prices since the introduction of the GST in 2000, with price rises of 1.7 per cent in June and 1.8 per cent in March,” says Ben Dorber, head of retail statistics at the ABS.

He says strong rises in sales volumes were also seen in clothing, footwear and personal accessory retailing, up 3.9 per cent, and department stores, up 3 per cent.

Other retailing sales volumes rose for the eighth consecutive quarter, up 1.2 per cent in June.

Sales volumes fell in two industries, with household goods retailing recording the largest fall, down 1.8 per cent in volume terms after a 1 per cent fall in March. Food retailing fell 0.8 per cent in June, the industry’s third consecutive quarterly fall in volumes.

“Cost of living pressures and increasing interest rates appear to be weighing more on sales volumes for household goods retailing, the industry where most high-priced discretionary items are sold,” says Dorber.

ANZ senior economist Adelaide Timbrel says although a spending growth slowdown is inevitable given high inflation and rising interest rates, large savings buffers and strong labour market conditions are likely to delay and reduce these negative impacts on consumption.

According to the ABS, there was underlying strength in volumes across the country with rises in six of the states and territories. Queensland had the largest rise, up 2.4 per cent in volume terms, followed by Tasmania (2 per cent), Western Australia (1.3 per cent), South Australia (1.3 per cent), Victoria (1.2 per cent) and New South Wales (1.1 per cent).

The Australian Capital Territory remained relatively unchanged, while the Northern Territory was the only state to record a fall in volumes, down 0.2 per cent. This continues a recent downward trend in volumes in the Territory which has recorded three consecutive quarterly falls.