Cashless retail sales defying expectations

The monthly data for July showed moderate growth in sales, after forecasting last month that there would be a fall of around 0.1 per cent. Instead, the data showed there has actually been a 0.7 per cent increase, above the 0.3 per cent figure from the Australian Bureau of Statistics.

While the Reserve Bank raised the cash rate by 50 bps last week, the NAB is predicting it will be followed by another 50-bp increase in September, which will probably start to impact consumer spending.

NAB chief economist Alan Oster said this month’s index reflected what the NAB continues to see in its 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,” he said.

“Product price growth is breaking new records – the survey measure of retail final product prices rose 3.3 per cent 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.”