Australian retail sales unexpectedly fell in April, marking the end of a three-month growth streak and prompting increased speculation about further interest rate cuts from the Reserve Bank of Australia (RBA).
Retail turnover dropped 0.1% month-on-month, according to Australian Bureau of Statistics (ABS) data, missing forecasts of a 0.3% rise. The result follows 0.3% growth in March and 0.2% in February.
“This is one indication that households are being a little cautious in the face of rising global uncertainty,” Ben Udy, lead economist for Oxford Economics Australia, told Bloomberg. “Unless consumption picks up a little more strongly in the coming months, the RBA may cut rates even sooner than we currently expect.”
The largest declines in April were recorded in clothing, footwear and personal accessory retailing, and department stores, both falling 2.5%.
ABS head of business statistics Robert Ewing said the warm autumn weather played a role.
“Retail spending eased in April, particularly on clothing purchases,” Ewing said. “Clothing retailers told us that the warmer-than-usual weather for an April month saw people holding off on buying clothing items, especially new winter season stock.”
He also noted the impact of weather disruptions and a late holiday period.
“Falls were partly offset by a bounce-back in Queensland as businesses recovered from the negative impacts of ex-Tropical Cyclone Alfred last month,” Ewing said.
State-level data showed Queensland retail trade surged 1.4%, led by recovery spending in cafes and household goods. Western Australia also posted growth of 0.4%, its 16th consecutive monthly increase. In contrast, turnover fell in New South Wales (-1.0%), Victoria (-0.3%), and South Australia (-0.1%).
“Queensland retailers recovered from last month’s temporary business closures and fewer customers,” said Ewing. “In April, we saw higher spending in the industries most impacted by ex-Tropical Cyclone Alfred.”
Other growth areas included:
Food retailing fell 0.3%, while online shopping rose 0.6% month-on-month, bringing annual online growth to 7.3%.
Large food retailers saw a 0.4% rise in turnover, while large non-food retailers fell 0.2%, and small retailers declined 0.3%.
Retail data added to a broader run of weak economic indicators, including declining private capital investment and flat construction activity. These trends have strengthened expectations of more rate cuts.
“Prior to [the] report, markets were fully pricing in two cuts this year,” Udy told Bloomberg. “Swaps traders are now fully pricing in three more cuts, with yields on three- and 10-year government bonds down about 10 basis points.”
Westpac economist Neha Sharma noted that holiday timing may have distorted the April figures.
“We had expected a soft print this month (+0.1%), but we noted there was a material risk of a contraction due to the timing of Easter and ANZAC Day holidays,” Sharma said. “The figures for March and April have been clouded by weather-and-holiday related noise.”
“Our latest Westpac-DataX Card Tracker update to mid-May showed lots of noise but with spending growth stabilising at a pace in line with the December and March quarter gains.”
April’s release is also one of the final stand-alone retail sales reports from the ABS. From July, the agency will replace it with a more comprehensive monthly household consumption report, set to launch on Thursday.
For more information, read the ABS media release and Westpac insights.
