Spending cools as inflation, rates bite

AUSTRALIAN consumer spending cooled during the Christmas period, bringing down the volume of retail sales for the first time in 11 months.

Retail trade fell 3.9 per cent in December, suggesting runaway inflation and rising interest rates have started to take a toll on purchasing power.

The annual inflation rate climbed to 7.8 per cent in the same month, its highest in 30 years. The retail trade data released by the Australian Bureau of Statistics on Tuesday reflected the worst monthly result since August 2020.

Retail turnover remained at a high level after rising 7.5 per cent from December 2021 during a record year for spending.

But economists were expecting a much smaller monthon-month decrease in December – when people would typically head to the shops during the festive season – than the 3.9 per cent recorded by the ABS.

ABS head of retail statistics Ben Dorber said the surprise drop suggested Australians were starting to rein in spending due to cost-of-living pressures.

“Retail businesses reported that many consumers had responded to these pressures by doing more Christmas shopping in November to take advantage of heavy promotional activity and discounting as part of the Black Friday sales event,” Mr Dorber said.

The ABS said the retail industries which experienced the largest falls in sales in December were those which had been boosted by the Black Friday sales events in November.

Department store sales tumbled by 14.3 per cent, followed by a 13.1 per cent drop in clothing, footwear and personal accessory sales and a 7.8 per cent decline in household goods sales.