Highlights

• Our data mapping points to moderate growth in retail sales in July. We see the official ABS measure gaining 0.3% on a month-on-month basis. We forecast a moderate (-0.1%) fall in the ABS measure last month, but this has been revised up significantly this month to +0.7%. Meanwhile the ABS printed monthly growth of 0.2% in June.
• Price pressures continue to reverberate across much of the economy, which has seen the RBA hike rates 50 basis points at each of the last three meetings. We see another 50bp hike next meeting, followed by a further two 25bp rises before the end of 2022. This is likely to dent consumer spending in the back half of 2022, although consumers have been surprisingly resilient so far, at least in nominal terms.

NAB Chief Economist, Alan Oster commented

This month’s index reflects what we continue to see in our high frequency weekly consumption data, with retail spending pared back somewhat from big gains earlier this year but remaining resilient in nominal terms against heightened economic uncertainty.

The July NAB Monthly Business Survey recorded a strong increase in retail confidence – up 19 points to almost erase the big drop in June. Product price growth is breaking new records– the survey measure of retail final product prices rose 3.3% at a quarterly rate in July. This is consistent with positive nominal growth, but likely some real weakness in retail spending.

It remains our view that central bank rate hikes in response to high inflation will see GDP growth moderate in 2023. The retail sector enjoyed generally high sales through covid, although some parts such as hospitality were hit hard. But this is unlikely to continue as rates rise and growth slows. However, so far at least, consumers have continued to spend in nominal terms. We watch closely, especially in our weekly data, for signs this trend is moderating or reversing.

For more information, please see the NAB Cashless Retail Sales Index (July 2022)