Retail spending fell by an unexpected 0.1 per cent in July, suggesting stimulus from tax cuts and lower interest rates is yet to flow through.
The seasonally adjusted retail spend fell to $27.41 billion for July, with cafes, restaurants and takeaway services leading a first fall in three months, according to Australian Bureau of Statistics data released on Tuesday.
The drop defied economists’ predictions of a 0.2 per cent rise following increases in both May and June.
BIS Oxford Economics chief economist Sarah Hunter said recent improvements in the Sydney and Melbourne housing markets were likely to boost the household goods retail sector as 2020 draws closer, though it appeared a broad-based pickup was still some time away.
“(That) won’t materialise until growth in household income accelerates,” Dr Hunter said on Tuesday.
“Given the construction sector downturn, which will weigh on employment, and the weakness in wages growth, we do not expect to see this in the near term.”
Economists had predicted a greater than usual focus on Tuesday’s data as policy markers monitor whether recent income tax cuts and interest rate cuts are stimulating consumption.
NAB’s Kaixin Owyong had flagged that a soft result could mean households largely saved the federal government’s tax refunds, using the money to repay debt.
Callam Pickering, APAC economist at jobs site Indeed, said the data confirmed what the RBA already knew about the economy.
“They know that wage growth and the retail sector is weak,” Mr Pickering said.
They know that conditions won’t improve materially until wage growth improves … that’s why the cash rate will be cut to 0.5 per cent by early next year.”
WA and the NT were the only areas to increase retail spending in July, rising 0.6 per cent and 0.3 per cent respectively, while SA and the ACT each copped a 0.5 per cent decline.
The national seasonally adjusted estimate fell 1.6 per cent for clothing retailing, 0.9 per cent for furniture, floor coverings, houseware and textile goods, and 0.2 per cent for department stores.
The seasonally adjusted estimate rose 1.0 per cent for hardware, building and garden supplies, and 0.3 per cent for groceries and supermarkets.
Online retail turnover contributed 6.1 per cent to total retail turnover in original terms in July, unchanged from the prior month.