Friday, July 19, 2024

July sales strengthen, but cost of living a concern

Retail sales continued to strengthen in July with trade increasing 17.9% compared to the same month last year, according to Mastercard SpendingPulse.

Most retail categories recorded substantial year on year sales growth as we lap the Delta lockdowns of 2021. This is led by lodging (up 63.3%), jewellery (up 47.6%) and apparel (up 31.3%).

Australian Retailers Association (ARA) CEO Paul Zahra cautions that sales in discretionary retail categories are elevated in their comparisons to 12 months prior, when businesses in NSW and Victoria were severely restricted.

“In July last year, our two largest states were in lockdown and spending dried up as many non-essential retailers were forced to close their doors. It wasn’t until October that businesses in NSW and Victoria finally reopened, and consumers were able to shop in-stores once again,” he says

“With travel restrictions in place a year ago, and tourism operators pushed to the brink, it’s no surprise to see lodging leading the way, with sales up 63.3%, as people get back to booking accommodation for work and holidays in Australia and abroad.

“The current retail trade environment is very different to a year ago and businesses are dealing with a whole new set of challenges due to inflation and rising costs associated with fuel, energy, supply chains and rents.

“What’s pleasing is that sales are currently holding up well despite the rising cost of living and interest rates, although it appears as though we haven’t seen the full impact of this hit consumers. The ARA’s forecasts with Roy Morgan on Father’s Day gift spending are down 7.7% compared to last year, with 42% of consumers saying the current cost of living challenges will impact how much they’ll spend.

“The concern is with inflation yet to peak, consumers will start to be squeezed when it comes to their discretionary purchases.”

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