Wednesday, February 28, 2024

Strong spending continues despite cost-of-living challenges

Retail sales continued to strengthen in August, with trade increasing 25.1% compared to the same month last year, according to the latest Mastercard SpendingPulse. Sales are also up 27.4% compared to pre-pandemic levels

Most retail categories recorded significant year on year sales growth as we continue to lap the 2021 Delta lockdowns.

While lodging was up 131.5% in August compared to 12 months ago, sales are down 5.5% compared to three years ago.

Discretionary retail has recovered well from last year’s Covid-19 impacts, with jewellery sales up 107% in August compared to a year ago, apparel up 83%, electronics up 66.2% and home furnishings up 51.6%.

Australian Retailers Association (ARA) CEO Paul Zahra says that retail sales have strong momentum for now but cautions 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,” he says.

“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.”

Mr Zahra also acknowledges that 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,” he says.

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