Retail sales keep defying gravity with August jump

Shoppers walk past stores on Degraves Street in Melbourne, Australia. Photographer: James Bugg/Bloomberg

SYDNEY: Australian retail sales boasted another strong month in August as shoppers spent on household goods and eating out, a sign consumers were proving resilient to red-hot inflation and rising interest rates.

Data from the Australian Bureau of Statistics (ABS) yesterday showed retail sales rose 0.6% in August from July to a record A$34.9bil (US$22.38bil or RM103.4bil)).

That topped forecasts of a 0.4% increase and left sales up a huge 19.2% on August last year when many shops were shut due to coronavirus lockdowns.

“This month’s rise was driven by the combined increase in food-related industries, with cafes, restaurants and takeaway food services up 1.3% and food retailing up 1.1%,” said Ben Dorber, head of retail statistics at the ABS.

Household goods also saw the biggest rise in five months, while spending on clothing fell back after a strong July.

Such resilience may reassure the Reserve Bank of Australia that it can keep raising interest rates without tipping the economy too far toward recession.

Rates have risen five months in a row to reach a seven-year top of 2.35% and investors are wagering on another half-point increase when the central bank meets next week.

Markets have also recently lifted the likely peak for rates to around 4.35%, reflecting in part aggressive tightening by the US Federal Reserve and many of its peers.

That has boosted the US dollar and slammed the Australian currency to a two-and-a half year low, adding to costs pressures through higher import prices.

Inflation had already surged to a 21-year peak of 6.1% in the June quarter, led by energy, construction and food costs, though petrol prices have fallen back sharply in recent weeks.

Indeed, the retreat in petrol seems to have cheered the public mood with ANZ’s measure of consumer confidence bouncing 2.1% last week to a four-month high.

“Such strength despite 225 basis points of rate hikes over the past five months may be quelling fears of a sharp downturn,” said Catherine Birch, a senior economist at ANZ.

“ANZ-observed spending data show household spending was solid in the first half of September, including on discretionary goods and services.” — Reuters

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