Australian Retail Sales: March 2023 - Food for thought

About the author:

Alexander Mees
Author name:
By Alexander Mees
Job title:
Co-Head of Research and Senior Analyst
Date posted:
04 May 2023, 8:00 AM
Sectors Covered:
Gaming and Retail

  • Australian retail sales in March 2023 rose by 0.4% month-on-month (m/m), which was slightly above the consensus forecast of a 0.3% rise. Sales were 5.4% higher than in March last year, which largely reflects higher selling prices.
  • The m/m growth in sales was driven by food categories, both groceries and eating out. More discretionary categories such as Clothing & Footwear and Household Goods underperformed, but there is no evidence as yet of a precipitous decline in expenditure. On a year-in-year (y/y) basis, all categories were up, with the exception of Household Goods.

Retail sales rose 0.4% m/m in March 2023

Preliminary data from the ABS show that Australian retail sales were A$35.3bn in March, 0.4% higher than February’s A$35.2bn and 1.5% below the record monthly high of A$35.8bn in November 2022.

The m/m growth rate of 0.4% is slightly better than the 0.2% reported in February.

Compared to the same month last year, sales were up 5.4%

Retail sales were up 5.4% y/y, down from the 6.5% growth in February and the slowest y/y growth in 14 months. The rate of growth is below the March quarter CPI print of 7.0%.

The fact that y/y retail sales growth has dipped below CPI suggests that Australian consumers are at last reining in their spending in response to the pressures on household budgets. This view is further supported by the relative outperformance of ‘essential’ categories like Food & Drink compared to non-essential categories.

Slowdown in discretionary spending

Clothing was the weakest category on m/m basis, down 1.0% compared to February. Whilst Eating Out and Food & Drink grew m/m up 1.5% and 1.0% respectively.

This could represent signs of a consumer pullback in spending on discretionary purchases. During the week, the RBA announced a further 25 bps rise in the cash rate to 3.85%.

Our Chief Economist, Michael Knox, expects the RBA to continue to tighten to 4.85% by the end of the year. We anticipate this will put further pressure on households, and we expect to see weaker consumer spending in the coming months.

Food retailing driven by high food inflation

Food retailing continues to grow m/m driven by high food inflation which has been passed through to consumers in addition to the rebound in eating out post COVID lockdowns.

Figure 1: Retail sales (A$m)

Growth stocks have had a choppy ride since the onset of the pandemicSource: Morgans, ABS

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