Early discounts fuel retail sales surge ahead of festive season
Retail turnover rose for the third month in a row, according to the latest ABS data.
Retail sales were surprisingly strong last month as shoppers made the most of early discounts to stock up on gifts for the festive season, further denting hopes of an early 2025 rate cut.
Australian Bureau of Statistics (ABS) data released yesterday showed retail turnover rose 0.6 per cent in October, following a 0.1 per cent rise in September and 0.7 per cent in August.
Compared to a year earlier, sales were also up 3.4 per cent.
Head of business statistics Robert Ewing said retailers experienced higher sales activity after dropping prices ahead of the Black Friday sales.
“The stronger than usual October month saw some retailers enticing buyers to spend early with discounting, particularly on discretionary items,” Ewing said.
Ewing said non-food industries had “significant rises”, with other retailing – which includes cosmetics, sports and recreational goods – increasing by 1.6 per cent, and household goods retailing up 1.4 per cent.
Meanwhile, there were falls in clothing, footwear and personal accessory retailing (-0.6 per cent) and department stores (-0.3 per cent).
“The rise in discretionary spending was driven by online discounting events while people also spent more on electrical goods, particularly televisions and other audio-visual equipment,” Ewing said.
Australian Retailers Association chief industry affairs officer Fleur Brown said consumers favoured purchasing discretionary goods and “little luxuries” as a result of high living costs.
“In a trend that shows shifting consumer habits due to the cost-of-living crunch, some Australians used October to plan for the holiday season early by beginning to stock up on gifts and make their purchases earlier than last year to assist with budgets.
“There is noticeable buoyancy in the 'other' category, which includes cosmetics, sports and recreational goods, as shoppers prove the 'lipstick effect' in action as they continue to spend on little luxuries and focus on health and well-being.”
AMP economist My Bui said the strong retail spending result beat expectations of a 0.4 per cent monthly rise.
The increase in consumer demand, coupled with recent data that showed high trimmed mean inflation, meant rate cuts at the start of next year would be unlikely.
“We have recently delayed our rate cut forecast to May 2025, as the RBA appears to be in no hurry to cut rates,” she said.
Brown said that despite the increase in retail turnover, 2024 was still “challenging for retailers”, calling for cash rate relief to ease cost pressures.
“Increased costs of doing business, interest rates, retail crime, supply chain demands and more have continued alongside subdued consumer spending,” he said.
“We again call for cash-rate relief to ease the pressure on businesses, especially for small business who operate on tighter margins, as they continue to battle tough economic headwinds.”
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