Australian Retail Sales Weaken Amid Higher Interest Rates

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Australian retail sales saw a significant decline in June, as consumers chose to disregard midyear price discounts amidst rising interest rates. This adds to their financial struggles, as they already face soaring living costs and increased mortgage repayments.

According to the Australian Bureau of Statistics, retail turnover fell by 0.8% in June compared to May, surprising economists who had expected a flat reading. This decline followed a 0.8% rise in sales in May and a 0.1% fall in April.

These figures further highlight the slowing economy and the increasing strain on consumers who have faced a series of interest rate hikes totaling 400 basis points in just over a year.

While the Reserve Bank of Australia is expected to consider another increase in the official cash rate at its upcoming policy meeting, the second quarter’s cooling inflation and the softness in retail sales will likely make a strong case for a pause.

The ABS reports that in May, stores engaged in additional discounting and promotional activities ahead of midyear sales events, which temporarily boosted turnover for retailers. However, this boost was short-lived, as consumers pulled back on spending in June.

Specifically, department store sales saw a significant decline of 5.0% in June, followed by a 2.2% drop in clothing, footwear, and personal-accessory retailing. Food-related spending showed mixed results, with cafes, restaurants, and takeaway-food services experiencing a decline while general food retailing saw a rise.

As food prices continue to rise, consumers are adjusting by opting for cheaper brands or simply buying less altogether.

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