Retail splurge hits new heights even as inflation weighs on sentiment

Economists say interest rate hikes and stagnant wages are already affecting consumer sentiment, even as Australia’s retail spend hits its highest ever level.

Figures released on Friday by the Australian Bureau of Statistics showed a record $33.92bn was spent in stores and online during April, a 0.9 per cent leap on the previous record set back in March. The fourth straight monthly retail rise was in line with market expectations and puts the national spend 9.6 per cent higher than it was a year ago.

While Easter holiday shopping helped keep demand strong, Friday’s figures were also further evidence of the inflationary pressures that have forced the Reserve Bank to embark on a steep hiking cycle.

The bureau’s director of quarterly economy-wide statistics, Ben James, said food retailing had the largest dollar rise in April, up 1.9 per cent, followed by cafes, restaurants and takeaway food services with a 3.3 per cent gain, and clothing, footwear and personal accessory retailing, which jumped 3.1 per cent.

Food retail – which includes supermarkets – rose by $400m for the month when combined with cafes, restaurants and takeaway. AMP senior economist Shane Oliver noted that the overall April retail increase was only partly due to inflation, adding that retail spending would continue to slow as demand rebalanced.

Meanwhile, Commonwealth Bank senior economist Belinda Allen said there was also a growing gap between consumer sentiment readings and consumer spending readings.

“Sentiment readings are around 20 per cent lower than a year ago levels, while retail trade is around 10 per cent higher,” Ms Allen said.

“Rising interest rates and negative real wages growth continues to weigh on consumer sentiment.

“In contrast, rising prices and a normalisation in spending patterns after lockdowns are supporting retail trade figures.”

Friday’s data predates the federal election but nonetheless hints at the rising cost-ofliving pressures that featured heavily in both Labor and Coalition campaigns.

At a state level, the April retail spend rose most sharply in Western Australia with a 2.2 per cent rise to $3.7bn.

The only state to register a fall was NSW, with spending in the nation’s biggest retail state dropping 0.3 per cent to $10.6bn for the month.