Australian retail spending experienced a strong surge, advancing 0.9% in April to a record $33.9 bn over the month. This has occurred against a backdrop of persistent prices pressures from sources such as fuel and food, with much of the cost burdens from supply disruptions being passed on to consumers. Nonetheless, retail spending has been a largely positive development, with fiscal and monetary buffers providing the support for household spending alongside a large glut of pent-up savings accumulated throughout the pandemic.
However, the transience of retail spending is a concern moving into the second half of the year. Economist cite declining sentiments, higher rates and surging inflation as material risks to the ongoing retail trend. ABS data notes a third of firms planned to raise prices by more than usual over the next three months. In addition, a growing disparity between consumer sentiment readings and spending data further portends a drop in spending as spending decisions catch-up. When that contradiction resolves, it’s likely a retail downturn will follow.
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