Cautious consumers have left retail spending flat in June.
Australian retail spending was $21.819 billion in June, almost unchanged from $21.814 billion in May, the Australian Bureau of Statistics said on Monday.
Economists were expecting retail spending to rise by 0.4 per cent in June.
Commonwealth Bank chief economist Michael Blythe said the figures showed weakness in department stores and clothing sales while there was a decent rise in spending on hospitality and services.
He said there were several reasons why retail spending remained a weaker part of the economy.
“Lacklustre outcomes sit at odds with sound household balance sheets, rising real wages, positive consumer sentiment readings and interest rates at stimulatory levels,” Mr Blythe said.
“We suspect that higher petrol prices and an elevated level of job security concerns are blunting the impact of some of these positives.”
Mr Blythe said improved job security would see low interest rates have more effect than they currently do, while a lower Australian dollar would also help redirect some spending back towards domestic retailers.
National Australia Bank senior economist David de Garis said the weaker than expected retail result made the high probability of a rate cut on Tuesday even more likely.
“The market is pretty well-priced for an interest rate cut tomorrow so it’s just a little bit more evidence to support that,” he said.
“We did have that burst of retailing at the start of the year, the January and February results were encouraging, but since then, it’s been quite weak.”
Mr de Garis said retail sales didn’t always provide the most reliable guide on consumer spending.
“Consumers might be spending more on healthcare or insurance or education and might be spending less in shops, but for what it’s worth, the figures are certainly suggestive of a defensive consumer,” he said.
“It’s a sign that consumers are still quite cautious with their spending so they’re using the rate cuts to pay off their loans at a faster rate and not spending more in shops.”
Australian National Retailers Association chief executive Margy Osmond said a rise in cafe, restaurant and takeaway food spending could be attributed to major sporting events that took place in June.
She said retailers had almost no capacity to increase prices, with average retail prices unchanged from where they were a year ago.
“The drop in the Aussie dollar will take some months to flow through to higher prices on the shelf,” Ms Osmond said.
“It will be critical for the incumbent government to address confidence in the current economic conditions and ensure they don’t spook consumers to retreat even further from spending.”
