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“On the downside: reopening dynamics are also seeing more spending shift towards ‘non-retail’ items such as travel and tourism; and a sharp rise in fuel costs is siphoning demand away from retail.”
The Westpac forecaster said the RBA’s moves to aggressively lift interest rates to curb growing inflation – revealed on Thursday to likely peak at 7.75 per cent later this year – was hitting the mortgage belt and broad sentiment.
“On balance, we expect the mix to sustain reasonable momentum near term but with an abrupt slowing towards year-end.”
NAB economist Taylor Nugent said higher inflation was likely masking a material slowdown in retail volumes. Mr Nugent noted the May spending figures, which are seasonally adjusted, were revised lower.
The latest figures published by the Australian Bureau of Statistics on Thursday round out the June quarter, but only consider nominal spending. More detailed data that includes sales volumes will be released on August 3.
Over the three months, nominal spending lifted 3.2 per cent, however once adjusted for inflation, NAB’s calculations suggest growth of just 1.6 per cent.
“[But] the retail components of the [consumer price index] release yesterday suggests a little over half of that growth is from price increases,” he said.
“Retail sales is heavily weighted towards good spending and reflects only around a third of the consumption and points to around a 0.25 percentage point contribution to quarter two GDP which is out on September 7.”
NAB high-frequency card data suggested spending had “flatlined” in most categories, with little real growth in food, household goods, clothing and footwear and department stores since April.
Similar data from ANZ released on Wednesday showed a dip in spending in July, which was normal kicking off the new financial year. ANZ economist Madeline Dunk said while card activity, which excluded petrol, fell slightly further than in prior years, it was still “within the normal range”.
“Very strong labour market conditions as well as strong average household savings buffers are likely protecting spending against a slowdown, for now,” she said.
“There’s no cause for alarm yet, but we will be watching consumer spending closely in coming weeks to identify an interest rate-led slowdown.”
Department stores experienced the largest fall in June, down 3.7 per cent, followed by food retailing (down 0.3 per cent) and household goods retailing (down 0.3 per cent). NSW was the only state to record a fall, down 0.2 per cent.
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