Australian retail turnover rose 0.7% in May 2023 to $35.5 billion, Australian Bureau of Statistics (ABS) data revealed.
This follows a flat result in April 2023 and a 0.4% rise in March 2023, with year-on-year retail spending up 4.2%.
Despite the 0.7% rise from April, clothing, footwear and accessory sales dropped alongside department store sales at 0.6% and 0.5% respectively. Marking the only drops across all retail, the two sectors slipped by $28.8 million (-$18.5 million for fashion and -$10.3 million for department stores).
This follows a rise in April for both sectors when sales were boosted by increased spending on clothing items due to cooler and wetter-than-average weather.
According to ABS head of retail statistics Ben Dorber, the overall rise in sales was buoyed by lifts in discretionary spending and food retail, including eating out.
“This latest rise reflected some resilience in spending with consumers taking advantage of larger than usual promotional activity and sales events for May,” Dorber said.
Other retailing recorded the largest rise at 2.2%, ABS reported, with turnover growing strongly across a variety of businesses, including online-only retailers, florists, and pharmaceutical and cosmetics retailers. An early start to some end-of-financial-year sales events boosted turnover along with Mother’s Day and the ‘Click Frenzy Mayhem’ sales event.
“Just as we saw during the November Black Friday sales last year, consumers appeared to take extra advantage of discounting during large sales events in May in response to cost-of-living pressures,” Dorber said.
National Retail Association CEO Greg Griffith said despite an overall tightening on discretionary spending, Australians seem ready to splurge when the occasion arises or during sales promotions.
However, the good news may soon end as Griffith warned the 5.75% payroll cost increase that goes into effect on 1 July could push inflation higher and weaken retail trade in the coming months.
“The wage increase has dampened any hope of the Reserve Bank pausing interest rates next month, which will further injure consumer confidence,’’ Griffith said.
Meanwhile, Australian Retailers Association (ARA) CEO Paul Zahra noted that household goods sales have experienced a decline over the last six months. The sector is currently down 4.4% year-on-year compared to May 2022, despite a 0.6% rise on April 2023.
Zahra said he expects this to be a bellwether for most consumer spending in the months ahead.
“It’s important to remember that cost-of-living pressures typically have a lag effect on retail – which is why we’re seeing a gradual softening in spending,” he said.
“Clothing and department stores are still showing modest growth, but this is mostly driven by early promotional activity and cooler than average temperatures.”
Zahra said cost-of-living and cost-of-doing-business pressures remain the greatest concern for retailers.
“While we’re seeing a softening in spending, retailers are simultaneously feeling the pressure from increasing operating costs across the board,” Zahra said. “We are now experiencing a collision between the cost-of-living crisis and a cost-of-doing business crisis”
Across the states and territories, retail was up in all states and territories except Tasmania, which was down 0.1% on the prior month. The Northern Territory recorded the largest rise of 1.6% and is now its highest level
“Conditions for small businesses are less favourable than their larger counterparts,’’ Griffith said.
“The recent Federal Budget has delivered on some cost-relief measures such as the Small Business Energy Incentive and the continuation of the instant asset write-off. However, there is still a need for ongoing government support for the retail sector.”