Retail volumes fall after 4 straight rises while consumer confidence dips

Ben Dorber, Australian Bureau of Statistics head of retail statistics, said retail sales volumes fell for the first time since the September quarter 2021, with volumes falling across all non-food industries as consumers tightened discretionary spending in response to mounting cost-of-living pressures.

Retail prices remained high, but price growth slowed to 1.1 per cent in December due to flat food retailing prices and additional discounting during Black Friday sales. This was the smallest rise in retail prices for 2022.

The Consumer Price Index for the December quarter grew more than retail prices, reflecting the stronger price growth in services seen in the quarter.

Department stores had the largest volume fall (-2.9 per cent), followed by other retailing (-2.4 per cent); clothing, footwear, and personal accessory retailing (-2.3 per cent); and household goods retailing (-2.0 per cent).

Growth in food-related volumes offset the weakness in discretionary spending. Food retailing (+2.1 per cent) had the largest rise, with volumes rising for the first time since COVID-19 delta lockdowns ended. Despite growth in this quarter, food retailing volumes were down 1.4 per cent compared to December quarter 2021.  

Food retailing price growth was flat this quarter, but prices remained high. Price falls for fruit and vegetables offset price rises elsewhere in the industry. This flat price result was lower than the rise in the CPI food and non-alcoholic beverages series due to scope differences between the two series. Food retailing prices reflect supermarket, liquor, and other specialised food store prices and exclude the CPI meals out and takeaway food series, which was a major component of the rise in the CPI index for food.

Cafes, restaurants, and takeaway food services (+0.3 per cent) recorded a more subdued rise as trading conditions in the food-related industries continued to normalise.

Retail trade volumes fell consistently across the country, with five of the eight states and territories recording a fall.

The dip in retail volume reflected the depressed NAB consumer confidence stress index that increased in Q4 2022 but remained comfortably below the survey average.

Stress associated with the rising cost of living continued to climb (now at a 4½-year high), with groceries, utilities, and transport top of mind. With unemployment still low and beginning to translate into wage growth, stress arising from job security is still causing the least stress.

That said, job stress is no longer falling, climbing noticeably in Q4. Consumer stress is highest among those aged 30–49 and in the $35,000–$50,000 income group.

The NAB report suggests the fall-off in retail may reflect changes in seasonal spending patterns, with Black Friday and early Christmas shopping bringing spending forward. Putting aside the month-to-month volatility, retail spending appears to have levelled off in recent months.

While total spending was up 1.6 per cent in the December quarter, this is the slowest quarterly growth rate this year.

The report said that fiscal caution will be a feature of the year ahead with consumer expectations about making major purchases in the next 12 months also somewhat more pessimistic (particularly for major household items and cars).

Consumers are still spending but switching to less expensive products to save money and researching to make more informed purchases. Fewer consumers are trying new products and are looking to trusted brands to help them manage current conditions through deals, loyalty programs, subscriptions, budgeting tools & alerts, and flexible payment options. This is providing important opportunities for customer retention.