Australian retail sales jumped past all expectations in July as shoppers spent big on clothing and food in a sign of consumer resilience, though some of the gains likely reflected higher prices.
Data from the Australian Bureau of Statistics on Monday showed retail sales climbed 1.3% in July from the previous month to a record A$34.7 billion ($23.8 billion), well above analyst forecasts of a 0.3% increase and the strongest result in four months.
“It’s clear that Australia’s consumers are not throwing in the towel in the face of soaring consumer prices and rising interest rates,” said Marcel Thieliant, a senior economist at Capital Economics.
“That reflects both the surge in labor income this year as employment growth has been very strong as well as the still-high household savings rate.”
Sales were up a heady 16.5% on a year earlier, though some shops were shut last year due to coronavirus lockdowns.
“Turnover rose in five of the six retail industries in July. This shows that, despite cost-of-living pressures, households are continuing to spend,” said Ben Dorber, head of retail statistics at the ABS.
Clothing, department stores, restaurants and food retailing all saw solid gains in the month, with higher prices for fresh food perhaps having an impact on the latter.
Inflation ran at a 21-year peak of 6.1% in the June quarter, led by energy, construction and food costs, though petrol prices have eased a little in recent weeks.
The Reserve Bank of Australia (RBA) has responded by raising interest rates every month since May, taking them to 1.85%.
Markets are wagering on another hike of 50 basis points at the next policy meeting on Sept. 6 and that rates will peak around 3.85% in April or May next year.
The hikes delivered so far will add around A$560 a month in repayments to the average A$620,000 mortgage, a clear headwind for Australia’s heavily indebted households.
Home prices have also turned lower after a stellar 2021, crimping household wealth and sentiment.
So far, however, actual consumption has not been nearly as depressed as confidence surveys might suggest. Westpac, for instance, said spending on its cards rose 1.3 index points in the two weeks to Aug. 20.
“The index continues to hold up well despite recent rises in official interest rates and slumping consumer sentiment, the latest read implying annual growth in card activity is tracking at a robust pace, over nine percentage points above its pre-Covid rate,” said Matthew Hassan, a senior economist at Westpac.