(Bloomberg) -- Australian retail sales held firm in September following a strong outcome in the prior month, suggesting a period of weakness in household consumption is gradually abating.
Sales advanced 0.1% from August, when they climbed a solid 0.7%, figures from the Australian Bureau of Statistics showed on Thursday. The result suggests that household purchasing power is being buttressed by steady wage growth, slowing inflation and recent government tax cuts and energy rebates.
“There doesn’t appear to have been much payback in September, which is a good sign for household spending,” said Sean Langcake, head of macroeconomic forecasting at Oxford Economics. “Today’s data are the first green shoots we’ve seen in spending data for quite some time.”
Thursday’s report showed retail sales rose 2.3% from a year earlier, up from 1.9% in September 2023. In volume terms they climbed 0.5% in the three months through September, suggesting consumption made a positive contribution to economic growth in the period.
Retail sales can be an important consideration in policy decisions given consumption accounts for more than half of gross domestic product. The Reserve Bank has repeatedly highlighted the outlook for household spending as a key uncertainty after lifting the cash rate to a 12-year high of 4.35% and keeping it there this year.
Households are unlikely to get any additional respite in the near-term with data this week showing core inflation stayed elevated last quarter, reinforcing the RBA’s view that monetary policy needs to stay restrictive for now.
The RBA meets next week, with economists and markets predicting no change to rates until 2025. The rate-setting board has said it’s still premature to consider cuts.
“The outlook for the retail sector is fairly mixed,” said Callam Pickering, an economist at global job site Indeed Inc. “Perhaps the biggest boost to the retail sector though might come in the form of interest rate cuts, with the market pricing in several rate cuts next year.”
Thursday’s retail data also showed:
- Household goods retailing — up 0.5% — recorded the largest gain, with cafes, restaurants and takeaway food services the only other industry to rise
- Department stores slipped 0.5% and food retailing also fell
- “Retail sales volumes rose for only the second time in the past two years, regaining some of the lost ground in discretionary spending this year,” said Robert Ewing, ABS head of business statistics
The ABS intends to cease the publication of retail sales data from mid-2025. It is switching to a more comprehensive monthly report on household consumption that will be released Friday with figures for September.
Separate data out on Thursday showed building approvals rose 4.4% in September, more than double economists’ estimate, after falling a downwardly revised 3.9% in the previous month.
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(Adds comments from economists, building approvals data.)
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