Australian fashion retailers began 2026 stocking up despite a slump in consumer spending on clothes and footwear.
New national accounts data from the Australian Bureau of Statistics (ABS) shows that imports of textiles, clothing and footwear rose 2.8 per cent in the first quarter of 2026, while household final consumption expenditure (FCE) in fashion fell 0.5 per cent. This is based on quarter-on-quarter data.
Around 97 per cent of the clothes sold in Australia are made overseas, according to research from the Australian Fashion Council.
In the December 2025 quarter, clothing and footwear prices fell as retailers discounted through an extended Black Friday and Boxing Day period – the same quarter that likely underpinned forward import orders now arriving. Fashion FCE in the December quarter rose 1.3 per cent, with through-the-year spending between March 2025 and March 2026 quarters up 2.3 per cent.
Fashion’s quarterly 0.5 per cent slip in FCE in the March 2026 quarter followed a 0.6 per cent rise in FCE in the March 2025 quarter.
The recent slump in fashion spending also comes as the electricity rebates that supported household budgets through 2025 ended in Q1. The household saving ratio remains elevated.
Meanwhile, the uplift in fashion imports came as total retail inventories fell by $802 million in Q1 2026, predominantly driven by car retailers reducing stock holdings in anticipation of low demand, ABS pointed out. Food and fuel retailers ran down inventories with increased sales.
There was also a drop in textiles, leather, clothing and footwear manufacturing in Australia, driving a 2.2 per cent fall in ‘Other Manufacturing’, which dragged on a 1.2 per cent lift in total manufacturing output.
These figures came from ABS’ national accounts figures, which show that Australian gross domestic product (GDP) rose 0.3 per cent in the March quarter 2026 and 2.5 per cent compared to a year ago. This is seasonally adjusted.
ABS head of national accounts Grace Kim said economic growth slowed in the March quarter, with modest household and public sector expenditure as well as cyclone disruptions to mining and export activities.
The slip in fashion FCE did not hamper household spending growth in the quarter, which was up 0.5 per cent. This growth includes elevated spending on electricity, gas and other fuels (up 11.7 per cent) as government rebates ceased.
Household spending on essential goods and services increased by 0.8 per cent, while discretionary spending rose by 0.1 per cent.
"Rising interest rates and significantly higher fuel costs in the March month likely created an environment for more cautious consumer behaviour,” Kim said. “This resulted in reduced spending across a range of household expenditure categories.”
Some economists believe this GDP growth offers a bleak picture for retailers.
KPMG chief economist Dr Brendan Rynne said the GDP results reveal an economy that has virtually stood still during the first quarter of this year.
Dr Rynne said Australia has, for some time, had the rest of the world add to our economic prosperity through purchasing our goods and services, particularly our natural commodities, at increasing rates and often at increasing prices.
“Unfortunately, however, we aren’t in the same position today, with Australia, like most non-major oil-producing countries, experiencing a negative terms of trade shock due to the ongoing Middle East conflict,” Dr Rynne said.
“We can see the consequences of this shock across large parts of the economy, with consumption adding only 0.3 per cent to growth over the quarter, net exports dragging economic growth down by 0.8 per cent, and government spending (which has been the key sector driving economic growth more recently) added nothing to economic growth.”
Despite that, Dr Rynne said business investment appeared strong, adding 0.7 per cent over the quarter. But, he said, this has been largely driven by the upswing in spending associated with building and commissioning Data Centres, with much of the gross spend associated with these assets being netted out because of the heavy reliance on technology imported from overseas.
“KPMG expects the domestic economy to remain weak through the remainder of 2026, with real growth next quarter anticipated to be only 0.2 per cent, followed by 0.4 per cent for each of the September and December quarters respectively.
“This growth profile suggests a declining annual rate of growth through 2026 such that by the end of the year the economy would have only grown 1.3 per cent, the weakest level of growth (outside of the COVID period) since the end of 2000.”