Below trend growth to continue
Overall retail spending looks to be coming under increasing pressure.
While our latest weekly tracking data reported unexpectedly high spending on end of financial year sales, overall retail spending looks to be coming under increasing pressure as consumers weigh gloomy economic expectations against a tight labour market.
Our retail sales forecast points to a small decline this month, with only cafes, restaurants and takeaways outperforming. This underlines our view that consumers have shifted spending from goods to services as COVID restrictions have eased. Our data also show stronger spending in Victoria and New South Wales, although this is unlikely to persist as all states share similar consumer sentiment risks.
The June NAB Monthly Business Survey recorded a sharp drop in confidence for the retail sector – down 21 points into negative territory. Product price growth remains very elevated – the survey measure of retail final product prices rose 2.9% in June at a quarterly rate. The survey data is consistent with CPI hitting a new record in Q2, which is likely to drive further RBA rate rises. Indeed, rapid retail price growth is likely obscuring weak real retail sales.
For more information, please see the NAB Cashless Retail Sales Index (June 2022)
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