Australian retail sales saw a significant surge in September, exceeding expectations and fueling speculation of an interest-rate rise. Factors such as consumer spending, implications for interest rates, and overall retail sector performance are discu...
Troy D. Hanson
October 30, 2023
Australian retail sales experienced a significant surge in September as consumers flocked to the shops, fueling speculation of a possible interest-rate rise next month.
According to the Australian Bureau of Statistics, retail turnover rose by an impressive 0.9% in September, surpassing economists' expectations of a 0.3% increase. This follows a 0.3% rise in August and a 0.6% gain in July.
Factors Influencing Sales
Various factors contributed to the increase in sales. The warmer-than-usual start to spring stimulated spending at department stores and retailers specializing in household goods and clothing. Consumers also increased their expenditure on hardware, gardening, and clothing items. Additionally, the release of a new iPhone model and the implementation of government rebates to offset rising electricity costs further supported spending.
Implications for Interest Rates
This surge in consumer spending comes after reports of stronger-than-expected inflation in the third quarter. As a result, many economists predict that the Reserve Bank of Australia may raise the official cash rate next month, ending a prolonged period of inaction.
Abhijit Surya, an economist at Capital Economics, states, "With Australia's retail recession likely having ended last quarter, we think the RBA will push ahead with a 25 basis point rate hike in November. We don't think the RBA can afford to overlook the renewed strength in consumer spending."
Despite the robust growth in September, overall spending trends remain relatively weak. In trend terms, retail turnover has only increased by 1.5% compared to the previous year, marking the lowest trend growth over a 12-month period in the history of the data series, according to the ABS.
Factors to Consider
The Reserve Bank of Australia has expressed uncertainty regarding consumer response to aggressive interest-rate increases since May last year, especially given the high levels of household savings resulting from the pandemic. Furthermore, the surge in immigration is also contributing to increased demand across the entire economy.
Retail Sector Performance
Most areas of retail experienced gains in sales during September. Department stores saw sales rise by 1.7%, followed by household goods retailing with a 1.5% increase. Sales of clothing, footwear, and personal accessories were also solid, according to the ABS.