SYDNEY -Australian retail sales volumes fell again in the June quarter as cost of living pressures and rising borrowing costs ate into consumer spending power, hampering economic growth and weakening the case for further interest rate hikes.
Data from the Australian Bureau of Statistics on Thursday showed real retail sales fell 0.5 percent in the second quarter to A$35.2 billion ($23.02 billion), matching analyst forecasts.
That was the third straight quarter of declines, a losing streak that has only happened once before – in the run up to the global financial crisis in 2008.
Sales were also down 1.4 percent compared to the June quarter of last year. Outside of the pandemic, the last time that happened was in the recession of 1991.
Falls were seen in sales of food, eating out, household goods and department stores.
“The widespread fall in sales volumes reflects what retailers have been telling us about consumers focusing on essentials, buying less or switching to cheaper brands,” said Ben Dorber, ABS head of retail statistics.
READ: Aussie retailers in for more pain as high interest rates squeeze spending – Citi
Since sales account for around 17 percent of gross domestic product, the drop will weigh on economic activity and analysts expect barely any growth in the quarter.
The weakness in spending was a major reason the Reserve Bank of Australia (RBA) this week decided to keep interest rates unchanged at 4.1 percent for a second month, the longest pause since it began tightening in May last year.
READ: Australian central bank holds rates steady for second month
Policymakers did caution that another hike might be needed to ensure inflation continued to slow, leaving markets implying around a 50-50 chance of one further rise to 4.35 percent by year end.
“With recent data showing a clear trend of easing inflation and slower demand growth, the probability that 4.1 percent is the peak for the cycle is growing,” said Alan Oster, group chief economist at NAB.
“However, given the upside pressures on inflation, the near-term risk on rates remains clearly to the upside,” added Oster, who expects one final hike in November.
READ: Australia inflation slows more than expected in Q2
Thursday’s data showed retail prices rose 0.9 percent in the second quarter, up from 0.7 percent the previous quarter.
Australia’s international trade performance is at least faring better, with its surplus widening to A$11.3 billion in June as imports of cars fell after a couple of strong months.
While prices for many of the country’s commodity exports have been slipping, volumes looked to have risen solidly in the June quarter and should make a much-needed contribution to economic growth.
($1 = 1.5291 Australian dollars)