Data from the Australian Bureau of Statistics (ABS) on Tuesday showed retail sales fell 3.9% in December from November, after 11 consecutive months of gains. That also marked the largest drop since August 2020 when the country was under a lockdown due to the COVID-19 pandemic.
That missed the median forecast of a drop of 0.3% by a large margin. November's result, driven by Black Friday sales, was revised up to a rise of 1.7% from an originally reported gain of 1.4%. "The large fall in December suggests that retail spending is slowing due to high cost-of-living pressures," said Ben Dorber, ABS head of retail statistics. "Retail businesses reported that many consumers had responded to these pressures by doing more Christmas shopping in November to take advantage of heavy promotional activity and discounting as part of the Black Friday sales event." Investors reacted by pushing the Aussie dollar lower to $0.7046, from $0.7060 before the release, while paring back the implied peak for cash rates to 3.7%, compared with 3.8% earlier.
Every sector that recorded a jump in November saw sales crashing last month, with department stores plunging 14.3% from the previous month. The slide wiped out gains made the previous two months and, combined with rising inflation, implied real sales also fell sharply over the fourth quarter and carved a chunk out of economic output. Inflation is already running at a 32-year high of 7.8%, with a closely watched measure of core inflation, the trimmed mean, accelerating to 6.9%, well above RBA's own forecast of 6.5%. The shock inflation report all but sealed the case for another 25 basis point (25 bps) hike from the Reserve Bank of Australia next week. The central bank has lifted cash rates by a whopping 300 bps to 3.1% to contain the inflation surge. The U.S. Federal Reserve is expected to raise rates 25 basis points on Wednesday, followed the day after by 50 basis points hikes from the Bank of England and European Central Bank.
An analysis by UBS on Tuesday see a sharp slowing in
spending by those who hold "extra" cash savings to a well-below
trend pace from mid-2023.
(Reporting by Stella Qiu; Editing by Kim Coghill)
