Preliminary data published by the Australian Bureau of Statistics (ABS) showed that retail sales declined slightly in October, recording the first drop since December 2021, as the rising cost of living and the aggressive tightening of the RBA monetary policy negatively affected consumer spending. Resilient consumer spending was one reason the RBA was confident in its decision to keep lifting borrowing costs, with a 0.25% hike expected next week that would take the cash rate to 3.1%.
According to the report, retail sales fell 0.2% to A$35.02 billion after rising by 0.6% in September. Economists had expected a 0.5% increase in sales. Household spending accounts for approximately 60% of Australia's GDP. The RBA was ready for a slowdown, its own forecasts show that consumption growth will slow to 1.3% by the end of 2023 from the projected 6.6% in December.
The ABS said that department stores had the largest fall (-2.4%), followed by clothing, footwear (-0.6%), household retailing (-0.5%), cafes restaurants, and takeaway food (-0.4%), and other retailing (-0.2%). Meanwhile, retail food sales increased by 0.4% compared to September.