Highlights

• Our data mapping points to a small negative retail sales print in June. We see the official ABS measure dropping 0.1% on a month-on-month basis as nervous consumers react to weaker economic expectations, high inflation and rising interest rates.
• Our series (along with some others) have been notably weaker than the ABS prints recently. There is a chance the ABS could defy expectations and print another strong result in June, although this is increasingly less likely as consumer sentiment shifts. That said, our weekly tracking data picked up an abnormally strong consumption figure for the last week of the financial year, suggesting some strength on the part of the consumer.
• Price pressures continue to mount across much of the economy and the RBA continues to hike rates – including an additional 50bp last week. We see another 50bp rise in August, followed by 25bp rises in September, November and February. This will dent consumer spending activity.

NAB Chief Economist, Alan Oster commented

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)