Early sales send bargain hunters on shopping spree

Poppy Johnston | July 3, 2024

Cash-strapped shoppers took advantage of an early start to end-of-financial-year sales, delivering a larger-than-expected boost to retail sales.

The 0.6 per cent lift in month-on-month sales in May beat the 0.3 per cent month-on-month consensus forecast, with total retail spending totalling $35.9 billion nationwide.

May’s bump higher followed a modest 0.1 per cent rise in April and a 0.4 per cent fall in March.

The stronger-than-expected figures land at a time of renewed concern interest rates may need to stay elevated for longer or rise further to combat lingering price pressures.

The Reserve Bank of Australia is looking for signs the economy slowing in response to higher interest rates to help inflation fall back within its two-three per cent target range.

Yet in a sign households are still hurting, last month’s retail sales boost was largely driven by financially-stretched consumers taking advantage of early end-of-financial year sales, the Australian Bureau of Statistics said. 

“Many retailers started end-of-financial year sales early, offering larger discounts than usual and noted that shoppers remain price-sensitive in response to persistent cost-of-living pressures,” head of business statistics at the bureau, Robert Ewing, said.

Over the month, clothing, footwear, and personal accessory retailing logged a 1.6 per cent lift, which followed falls in the two previous months.

Household goods retailing lifted 1.1 per cent and other retailing 0.2 per cent, while food-related spending was mixed. 

Oxford Economics Australia head of macroeconomic forecasting Sean Langcake said the broad trend for retail sales remained “very subdued”. 

“Discretionary spending continues to be squeezed by cost-of-living pressures, including restrictive interest rates,” he said. 

Tax cuts coming into force this week would help support household budgets, the economist said.

“But we expect momentum will still be patchy over the next year as consumers navigate their current malaise,” he added.

Building approvals also rose over the month, posting a 5.5 per cent rise in May on the statistics bureau’s count.

In April, approvals lifted 1.9 per cent.

Commonwealth Bank of Australia senior economist Belinda Allen said approvals had recorded a “slight improvement” throughout 2024.

“Approvals generally rise when interest rates are cut,” Ms Allen said. 

“Although capacity constraints in the construction industry could limit the lift in supply coming through when easing starts.”