Australia’s economic data flow turned sour this week, with consumer spending, building activity and business investment all underwhelming, signalling a potential broader loss of momentum as households and firms grapple with multiple pressures.
According to data from the Australian Bureau of Statistics (ABS), retail turnover unexpectedly dipped 0.1% in April, disappointing market consensus for a 0.3% rise, while building approvals dropped 5.7% – the second straight monthly fall – led by a sharp pullback in multi-unit dwellings.
The downbeat data followed weaker-than-expected private capital expenditure figures and flat construction activity in the March quarter. Together, the numbers paint a picture of an economy struggling to sustain momentum, even as inflation cools and the Reserve Bank of Australia begins to ease interest rates.
Cautious consumers, building slump
The surprise decline in retail follows modest gains of 0.3% in March and 0.2% in February. However, the April figure was up 3.8% over the same period in the previous year.
The decline was driven by significant falls in clothing, footwear and personal accessory retailing (down 2.5%) and department stores (also down 2.5%), attributed to warmer-than-usual weather discouraging winter apparel purchases.
Meanwhile, the 5.7% slump in building approvals to 14,633 dwellings follows an even greater fall in March, of 8.8%. The headline figure was dragged lower by a 19% decline in multi-unit and apartment dwellings, which fell to 4,999 approvals. In contrast, approvals for private houses rose 3.1% to 9,349.
Total residential building value fell 1.3% to $8.91 billion, while non-residential approvals rose 14.7% to $7.91 billion, signalling continued investment in commercial infrastructure.
While residential construction is holding to an uptrend, it remains well below what is needed to meet population demands. However, easing material costs and labour constraints suggest some of the sector’s long-standing capacity pressures may be starting to soften.
Quarterly construction, capex disappoint
Quarterly ABS data released this week showed total construction activity was flat in the March quarter, up just 3.5% year-on-year. Residential building remained on a gradual recovery path, but infrastructure construction disappointed, falling 1% despite a strong pipeline of public and renewable projects.
Meanwhile, private capital expenditure slipped 0.1% in the quarter – dragging annual growth into negative territory at -0.5%. Non-mining investment fell 0.9% on the quarter, reflecting a broad-based pullback in equipment spending, while the mining sector rose 1.9%.
Forward-looking capex plans for 2025-2026 suggest a subdued investment outlook, with little sign that Australian businesses are reacting materially to heightened global trade tensions stemming from US policy changes.
Eyes on GDP next week as soft data mounts
Attention now turns to next Wednesday’s national accounts, where Australia’s March quarter GDP figures will be released. Westpac is forecasting GDP to rise just 0.4% quarter-on-quarter, down from 0.6% in Q4 2024, with growth in domestic demand expected to slow to 0.3%.
A weak GDP result would further bolster the case for additional monetary policy support later this year, particularly if global trade tensions or domestic confidence falter. However, Westpac economist Neha Sharma noted that how much of a boost that would mean for spending remains unclear.
“The consumer spending performance in early 2025 and conservative response to last year’s tax cuts continue to point to a gradual recovery at best,” she said.