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A record-breaking month for retail as inflationary pressures mount

Australian retail sales have set a new record for the third straight month with $34.2 billion spent in stores and online in May.

A record-breaking month for retail as inflationary pressures mount
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But while sales figures were good, Australian Retailers Association chief executive Paul Zahra cautioned that the growth is unlikely to be sustainable, and also reflects the higher consumer prices that are now flowing through the economy as inflationary pressures take hold.

“It’s pleasing to see retail sales maintaining their strong trajectory – however, the figures aren’t necessarily a true reflection of how the sector is performing in an inflationary landscape,” he said. “The high sales volumes can be partially attributed to the higher consumer prices we’re seeing across the economy, particularly in the food industries. Whilst sales are elevated, business costs are increasing enormously, in many areas at a far higher rate.”

Mr Zahra said it’s unlikely retail spending will maintain these levels as the rising cost of living begins to take hold of family budgets.

“A generation of homeowners are experiencing their first interest rate hikes, so there’ll be some natural belt tightening,” he said. “When people rein in spending, discretionary purchases are some of the first things they cut.

“Leasing costs are going up for many businesses, along with fuel and energy, while supply chains continue to be constrained. There’s been no let up to the disruption since Covid hit; things have only intensified since the war in Ukraine and many small businesses in particular are challenged right now.”

He said as well as inflationary pressures, businesses are also struggling with skill shortages.

“The majority of ARA members say the situation has gotten worse over the past three months, and without government intervention, the situation will only deteriorate,” he said.

The Australian Bureau of Statistics said the retail figure rise in May was the fifth consecutive monthly rise in retail turnover following rises of 0.9 per cent in April 2022, 1.6 per cent in March 2022, 1.8 per cent in February 2022 and 1.6 per cent in January 2022.

Ben Dorber, director of quarterly economy wide statistics said there was growth across five of the six retail industries in May as spending remained resilient.

“Higher prices added to the growth in retail turnover in May. This was most evident in cafes, restaurants and takeaway food services and food retailing,” he said.

Department stores had the largest rise, up 5.1 per cent, followed by cafes, restaurants, and takeaway food services (1.8 per cent), other retailing (1.5 per cent), food retailing (0.6 per cent) and household goods retailing (0.4 per cent).

Clothing, footwear, and personal accessory retailing was the only industry to record a fall, down 1.4 per cent, following three consecutive monthly rises.

Of the states and territories, NSW had the largest rise in retail turnover, up 1.6 per cent, followed by Victoria, up 1.3 per cent.

Turnover also rose in South Australia (1.9 per cent), Western Australia (0.2 per cent), Tasmania (1.1 per cent) and the Northern Territory (0.6 per cent).

The only states or territories to record falls were Queensland, down 0.4 per cent, and the ACT, down 0.3 per cent. The fall in Queensland follows increased turnover from the flood recovery in March and a boost from tourism in April.

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