For the fifth consecutive month, retail trade figures in Australia are up according to the Australian Bureau of Statistics, with some suggesting this could be the catalyst for a further interest rate rise.
According to the data, total retail turnover was up 0.9% in April and again in May, and while this is positive news, I don’t believe this would be enough for the RBA to raise rates again so soon, especially on the back of an unexpected 0.5% increase in June.
Taking a closer look at the data, it shows that while retail spending is up, it has slowed considerably compared to the first quarter of 2022, as spending from January to March increased at least 1.6% each month. Given that April and May only achieved growth of 0.9%, this is an indication that consumers may be starting to feel the effect of rising inflation and interest rates.
It seems that those in South Australia are spending more with retail turnover up 1.9% followed by NSW and Victoria, which are both up over 1%, while Queensland and the ACT spent less in May. Not surprisingly, department stores were the big winners with spending up 5.1% followed by cafes, restaurants and take away food with spending up 1.8% in May, while clothing, footwear and personal accessory retailing was down 1.4%.
We know that pent up demand caused by successive lockdowns has driven increased spending in the past year, while supply chain issues have pushed inflation to higher levels. It may be that the current figures are a sign that demand is easing, and things are returning to normality.
For investors, the broader retail sector is unlikely to do well in the coming months; therefore, I recommend they be very selective when looking for opportunities.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in bookstores and online at www.wealthwithin.com.au