Retail sales drop 3.9% as first RBA decision for the new year looms

This 3.9% decline in retail sales to $34.472 billion comes off the back of ABS inflation data for the December quarter, which shows a 1.9% increase from September and a 7.8% increase annually.

Despite the Christmas holiday period, Aussies’ spending fell with the ABS details turnover across industries previously boosted by Black Friday shopping sprees.

ABS head of retail statistics Ben Dorber said the big fall in December indicated that retail spending was slowing due to high cost of living pressures.

“Retail businesses reported that many consumers responded to this pressure by doing more Christmas shopping in November to take advantage of heavy promotional activities and discounts as part of the Black Friday sales event,” Mr Dorber said.

“Seasonal spending patterns continue to change and evolve around Black Friday and the holiday season.”

Major bank economists had expected a decline in retail sales, but not to the extent outlined by the ABS data.

ANZ and Westpac economists wrote in a decline of 0.2% and 0.3% respectively for December retail sales, while CommBank economists expected a larger drop of 1.2%, backed by changing seasonal patterns driven by the rise of Black Friday sales.

IFM Chief Economist Alex Joiner, who outlined beyond the highs of the COVID-19 pandemic and the introduction of GST, the December result is the worst decline in the history of the series.

A massive pullback in retail sales, outside of the pandemic and GST introduction the worst decline in the range’s history. Most likely to offset the rise in November and likely mean retail sales will detract from Q4 GDP, the party is over… pic.twitter.com/wwOE1Tdl6m

— Alex Joiner (@IFM_Economist) January 31, 2023

Westpac senior economist Matthew Hassan noted that the December drop reversed the gains made in November.

“Taking the two months together suggests that there was an underlying downtrend in response to rising interest rates that may have bitten harder late in the year,” Mr Hassan said.

Across industries, the ABS revealed that department stores suffered the biggest hit in sales, down 14.3%, followed by clothing, footwear and accessories, down 13.1%.

Food retail was the only industry in December to buck the trend, with the ABS noting that sales volumes rose by 0.3%.

The downward trend in retail sales was seen in every state and territory throughout December, with the lowest decline in the Northern Territory at 2.4% and the largest decline in both Victoria and Western Australia at 4.7%.

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