Australian Retail Council (ARC) analysis of new Australian Bureau of Statistics data shows household spending on retail reached $39.68 billion in June, up 4.7% compared with the same month last year.

The industry body says that Australian retail spending remained resilient throughout the month but notes that weaker growth during the end-of-financial-year sales period shows consumers remain cautious and highly focused on value.

Annual growth slowed from 5.8% in May, broadly aligning with earlier ARC and Roy Morgan research forecasting subdued growth during this year’s EOFY sales as households tightened their budgets.

ARC Chief Economist Glenn Fahey says the result shows consumers are continuing to spend, but the headline figure overstates the underlying strength of the retail economy.

“Retail spending held firm in June, demonstrating Australian consumers remain more resilient than confidence measures would suggest,” he says.

“However, this was clearly a softer result than May, despite EOFY sales. Annual growth slowed from 5.8% to 4.7% during one of the retail calendar’s major promotional periods.

“Consumers have not stopped spending, but they are increasingly price-conscious and prepared to delay discretionary purchases until they see compelling value.”

Mr Fahey says the latest inflation figures also put the retail result into perspective.

“Headline inflation was running at 3.8% in June, while trimmed mean inflation remained elevated at 3.6%. Once inflation and discounting is taken into account, real spending growth is fairly soft – around 1% on a broad inflation-adjusted comparison,” he says.

“That’s positive growth, but it’s well below what retailers would typically expect in a strong trading environment. Consumers are still spending, but the volume of additional goods and services being purchased remains modest.”

Cafes, restaurants and takeaway food services recorded the strongest annual growth at 7.1%, followed by household goods retailing at 6.3%.

By contrast, spending at department stores and large online retailers was broadly flat, declining 0.1% compared with June last year. Clothing, footwear and personal accessory spending increased by a more modest 3.9%.

Mr Fahey says EOFY discounting may have supported customer activity but can lead to pressure on retailer margins.

“Turnover shouldn’t be confused with strong profitability, particularly during discount periods,” he says.

“Retailers continue to face elevated costs across wages, energy, insurance, freight, leasing and supply chains, while cautious consumers limit their ability to recover those costs.”