Strong August retail sales as consumers keep spending despite cost-of-living challenges

According to the latest Mastercard SpendingPulse™ report trade increased by more than 25 per cent in August compared to the same time last year while sales were up more than 27 per cent.

Most retail categories recorded significant year-on-year sales growth with lodging up a massive 131.5 per cent in August compared to 12 months ago.

Discretionary retail has recovered well from last year’s COVID impacts, with jewellery sales up 107 per cent in August compared to a year ago, apparel up 83 per cent, electronics up 66.2 per cent and home furnishings up 51.6 per cent.

Australian Retailers Association chief executive Paul Zahra said retail sales have strong momentum for now but cautioned there could be a slowdown in spending as we head into 2023.

“In August last year, our two largest states were in lockdown, so it’s not surprising to see discretionary retail categories record such significant growth compared to 12 months ago. What’s pleasing though is that sales are also up compared to pre-pandemic levels across most retail categories,” Mr Zahra said.

“While consumer spending is strong for now, the concern is that we haven’t seen the full impact of the interest rate hikes hit household budgets. According to the government, inflation is also yet to reach its forecast peak, so we could see a softening of sales as we head into 2023.

“While the retail sector is performing well overall from a sales perspective, the results remain uneven with small businesses more acutely challenged by inflationary impacts and rising costs associated with fuel, energy, supply chains and rent. The government’s fuel excise cut is also about to come to an end, adding further pressure to businesses and consumers.

“It’s incredible to see retail sales perform so well in the face of cost-of-living pressures, however the coming months could prove to be more challenging with household savings starting to erode and mortgage holders being squeezed even tighter.”