Cautious consumers slow Australian retail growth to 4.7%

Cafes and restaurants recorded the strongest spending growth at 7.1%.

Australian retail spending rose 4.7% year on year to $25.76b (A$39.68b) in June, although growth slowed during the end-of-financial-year (EOFY) sales period as consumers remained cautious and prioritised value, according to the Australian Retail Council (ARC).

ARC's analysis of Australian Bureau of Statistics data showed annual retail spending growth eased from 5.8% in May to 4.7% in June, in line with earlier forecasts of weaker EOFY sales as households tightened their budgets.

ARC Chief Economist Glenn Fahey said consumers continued to spend despite weaker confidence, but underlying retail conditions remained soft.

He said spending growth slowed during one of the retail calendar's biggest promotional periods, suggesting shoppers were increasingly price-conscious and willing to delay discretionary purchases until discounts became available.

Fahey added that inflation continued to weigh on real spending. With headline inflation at 3.8% and trimmed mean inflation at 3.6% in June, inflation-adjusted retail spending growth was about 1%, indicating only modest increases in the volume of goods and services purchased.

“That is positive growth, but it is well below what retailers would typically expect in a strong trading environment,” he said. “Consumers are still spending, but the volume of additional goods and services being purchased remains modest.” 

Amongst retail categories, cafes, restaurants and takeaway food services recorded the strongest annual growth at 7.1%, followed by household goods retailing at 6.3%.

Clothing, footwear and personal accessories grew 3.9%, whilst spending at department stores and large online retailers edged down 0.1%.

Fahey said heavy EOFY discounting may have supported sales but continued to pressure retailer profitability, as businesses faced higher costs for wages, energy, insurance, freight, leasing and supply chains.

“Turnover should not be confused with strong profitability, particularly during discount periods,” he said. 

Retail spending increased across all Australian states and territories. The Northern Territory posted the fastest annual growth at 8.8%, followed by Western Australia at 7.5%

The Australian Capital Territory and New South Wales recorded the slowest growth at 3.1% and 3.2%, respectively.