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Retail therapy: Surprise sales surge

Now this is a bit of a surprise — Australian retail sales jumped sharply in August, but shoppers are supposed to have been put to sleep by high interest rates and pressure on household incomes.

The tax cuts that started on 1 July, we have been confidently told by media business writers, economists banks and others, were being “banked” and used to pay down home loans or put away for a rainy day.

And yet August’s retail trade data shows a surge in sales by almost double the forecast rise of 0.4%.

The Australian Bureau of Statistics said that retail sales rose 0.7% in August, after the 0.1% rise in July and the 0.4% bounce at the end of June, May’s rise of 0.6% and April’s 0.1%.

All in all, retail sales have now risen four months in a row and the through-the-year growth of 3.1% was the strongest since May 2023.

The ABS said in commentary in Tuesday’s report that sales “were much stronger as the impact of income-tax cuts in July fed through to spending, while unusually warm weather lifted clothing and cafe sales.”

“This year was the warmest August on record since 1910, which saw more spending on items typically purchased in spring. This included summer clothing, liquor, outdoor dining, hardware, gardening items, camping goods and outdoor equipment.”

That will not be music to the ears and eyes of the inflation hawks at the Reserve Bank, who have been banking on restraint from consumers in handling their tax cuts.

Not even the climate is helping the central bank in its valiant attempt to keep inflation under control, so is climate change playing an interfering role?

And will we now be “punished” by interest rates being left higher for longer as the henny pennies among the business media and economics commentators waffle on about demand being boosted and putting upward pressure on rates.

The ABS said that sales at department stores rose 1.6% in August, with clothing, footwear and personal accessory retailing rising 1.5% and other retailing by 1.3%.

Both food-related industries rose, led by cafes, restaurants and takeaway food services (1.0%), followed by food retailing (0.6%).

“The lift in turnover from the warmer weather was also boosted by higher discretionary spending as consumers took advantage of Father’s Day sales events during the month,” Ewing added.

“While the Eastern mainland states led the rises, most states and territories benefitted from the earlier-than-usual spring temperatures. Although, some unseasonal rainfall over parts of Western Australia dampened sales slightly,” Mr Ewing said.

Household goods sales eased 0.3% and some economists said this signalled consumption was not as solid as the raw data suggests.

But the ABS pointed to the strong sales of these items in May and June as consumers took advantage of end of financial year and other sales. 

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