Retail spend disappoints

Improvement from April still misses expectation

RETAIL spending returned to growth in May after the previous month’s surprising downturn but still fell short of economists’ expectations in another disappointing set of official data.

After declining 0.1 per cent in April, retail spending rose 0.1 per cent in the month to $27.3 billion, according to seasonally adjusted data released yesterday by the Australian Bureau of Statistics.

But the result missed consensus forecast of a 0.2 per cent increase, just days after the Reserve Bank again cut the cash rate and Governor Philip Lowe ( pictured) expressed concern about the outlook for household consumption. Dr Lowe named weakness in consumer spending as a factor in cutting the rate to a new record low 1.0 per cent as the central bank tries to lift sluggish economic growth.

AMP Capital chief economist Shane Oliver yesterday said retail spending would probably remain weak even though rate cuts and signs of a housing market recovery prove sentiment.

“Retail sales growth will be weak going forward given the lagged negative wealth effect could imflowing from the fall in house prices since 2017, and likely very constrained house price growth ahead, continuing low wages growth and an upwards drift in unemployment,” Dr Oliver said.

Increased consumer caution in the lead-up to the federal election may also have played a part in retail softness, according to ANZ economists Adelaide Timbrell and Felicity Emmett, with food retailing and recreational stores potentially suffering from an April “holiday hangover”.

They said the election could have delayed some bigger purchases despite improved consumer sentiment, employment and participation rate.

Cafes, restaurant and takeaway food services offset declines at department stores and supermarkets during May, while spending on household goods rose 0.5 per cent but clothing, personal accessories and footwear fell by 0.2 per cent. The Australian dollar rose to a two-month high of 70.48 US cents shortly after the release of the data. The figures were released at the same time as data showing a 1.1 per cent decrease in job vacancies for the three months to May.

Public sector vacancies rose 3.8 per cent but vacancies in the private sector fell 1.6 per cent, pulling down the overall rate from 1.2 per cent growth in the February quarter.

Monthly retail spending rose in Victoria, SA, ACT and the NT, but fell everywhere else