Australia retail sales suffer first fall of 2022
SYDNEY: Australian retail sales suffered their first fall of 2022 in October as rising prices and higher interest rates finally seemed to have an impact on spending, a surprisingly soft result that suggests tighter policy is working as intended.
Data from the Australian Bureau of Statistics (ABS) yesterday showed that retail sales declined 0.2% in October from September to A$35bil (Us$24bil or Rm105bil).
That was well under forecast of a 0.5% increase, although it still left sales up 12.5% on October last year when pandemic restrictions were making shopping difficult.
“The October fall in retail turnover ends a run of nine straight monthly rises and suggests increased cost of living pressures including interest rate rises have started to weigh on consumer spending,” said Ben Dorber, head of retail statistics at the ABS.
Inflation is running at a 32-year high of 7.3% and set to reach 8% or higher this quarter, with food, energy and construction costs all rising.
To restrain this surge, the Reserve Bank of Australia (RBA) has lifted interest rates by 275 basis points since May to a nine-year top of 2.75%.
Markets are still wagering on another quarter-point hike to 3.10% at its December policy meeting next week, but trimmed the implied peak for rates slightly to around 3.78% from 3.85% ahead of the retail data.
RBA governor Philip Lowe has cited consumption as a major uncertainty given the full effect of past rate rises is yet to show in mortgage payments, which could climb by around A$950 (RM2,842) a month on a typical loan.
This was one reason the central bank hiked by only 25 basis points in November, rather than half a point.
Sales actually look stronger this month with Westpac data on card spending showing activity picking up and its tracker index running almost 38% above pre-pandemic levels.