Retail trade data ‘disappointing’ for April as consumers cut back
Australian retail sales data was weak for April as cautious consumers reduced their discretionary spending.
Australian retail turnover rose only 0.1 per cent in April 2024, according to seasonally adjusted figures released yesterday by the Australian Bureau of Statistics (ABS).
This followed a 0.4 per cent fall in March 2024 and a 0.2 per cent rise in February 2024.
ABS head of retail statistics Ben Dorber said underlying retail spending continues to be weak with the small rise in turnover failing to compensate for the fall in March.
“Since the start of 2024, trend retail turnover has been flat as cautious consumers reduce their discretionary spending,” said Dorber.
Turnover in most non-food-related industries rose in April. Other retailing was up 1.6 per cent and had the largest rise this month, followed by household goods retailing which increased 0.7 per cent and department stores, up 0.1 per cent.
Clothing, footwear, and personal accessory retailing fell by 0.7 per cent.
“The relatively earlier Easter and the different timing of school holidays across the country meant we saw some added volatility in turnover in March and April,” Dorber said.
“Looking across the past two months, we see weak underlying spending in most parts of the retail industry.”
CreditorWatch chief economist Anneke Thompson said that consumer spending in Australia is still very weak, with retail spending remaining flat since the start of 2024.
“Westpac consumer confidence data confirms that Australian consumers remain extremely despondent,” said Thompson.
“Although Treasury forecasts that income tax cuts and cost of living measures announced in the budget will assist in a recovery in real disposable income over the 2025 financial year, it remains to be seen if this will flow on to increased spending in the retail sector.”
Even if real disposable incomes increase with income tax cuts, Thompson said a weakening labour market and rising unemployment tend to make Australian consumers uneasy about overspending.
“It is likely, then, that Australian consumer confidence will remain weak even if they have more disposable income. A recovery isn’t likely until we see two or three cuts to the cash rate, as only then will mortgage holders start to feel more confident that they have some breathing space in their monthly budget,” Thompson said.
“Given we are unlikely to see the second or third cut to the cash rate until the final quarter of the 2025 financial year, we expect that insolvencies in the retail sector will increase, especially amongst smaller, discretionary retailers.
“The retail trade sector has already recorded a 35 per cent increase in insolvency rates over the year to April 2024.”
AMP economist My Bui said the retail sales data disappointed again this month, with the 0.1 per cent increase below the consensus expectation for a 0.2 per cent rebound.
“The weak trend in retail showed no signs of abating. Compared to April last year, retail sales only increased 1.3 per cent,” Bui said.
“Meanwhile over the last three months, total retail revenues were flat despite high inflation and strong population growth. This means that nominal and real spending per capita continued to fall this month, as households tighten their discretionary spending.”
Bui said the retail data aligns with a challenging backdrop for consumers driven by elevated inflation, prior rate hikes and an increasing tax take from bracket creep.
“While household disposable incomes will benefit from the government’s cost-of-living relief measures from 1 July including tax cuts energy rebate, Commonwealth Rent Assistance and cheaper medicines, we don’t think the boost to disposable incomes will be inflationary,” she said.
“Consumer surveys are indicating that most consumers are still negative about buying major household items. 80 per cent of households aware of the upcoming tax cuts intend to save them, the labour market is weakening and wages growth looks to have peaked.”
