The latest Deloitte Access Economics’ Retail Forecasts suggests consumer spending reductions might put a halt to interest rate rises from the Federal Reserve, noting: “The retail recession that has been foreshadowed by Retail Forecasts for some time has arrived. Real retail turnover in Australia fell again – by 0.6% over Q1 2023 – locking in a retail recession after the 0.3% decline in Q2 2022.”
Yet at the end of June 2023, news reports suggest retail spending is up considerably, which nervous ears could interpret as another interest-rate rise next Tuesday.
However, Ben Dorber, head of retail statistics at Australian Bureau of Statistics (ABS) suggests that the increased turnover is because of seasonal sales, stating: “Retail turnover was supported by a rise in spending on food and eating out, combined with a boost in spending on discretionary goods. This latest rise reflected some resilience in spending with consumers taking advantage of larger than usual promotional activity and sales events for May.”
Of course, perspective is important. Household goods retailing had a modest rise (+0.6%) following three straight monthly falls, with turnover down (-4.4%) since May 2022. Clothing, footwear, and personal accessory retailing (-0.6%) and department stores (-0.5%) were the only retail categories to fall this month. This follows a rise in April when sales were boosted by increased spending on clothing items due to cooler and wetter than average weather.
However, the Deloitte report noted: “This retail recession isn’t a surprise. High inflation and rising interest rates have eroded the purchasing power of consumers and, in response, consumer sentiment is now at historically pessimistic levels. We’re also expecting consumer caution to extend further than just goods, with consumers expected to also pull back on services, which could result in a broader based “consumer recession” later this year.
“There are, . . . some silver-linings for consumers, with retail-price growth starting to ease. Headline inflation over Q1 2023 was 1.4% while trimmed mean CPI was 1.2%, both much higher than the 0.6% retail price growth.”