Investing.com-- Australian retail sales unexpectedly shrank in March as consumer spending remained under pressure from sticky inflation and high mortgage rates- a trend that is expected to continue in the coming months.
Retail sales fell 0.4% month-on-month in March, data from the Australian Bureau of Statistics (ABS) showed on Tuesday. The reading was weaker than expectations for an increase of 0.2%, and marked a sharp reversal from the 0.3% rise seen in February.
Spending had received a boost in February from a series of concerts by pop sensation Taylor Swift- a trend that did not spill over into the following month. Retail spending remained largely under pressure from a higher cost of living.
“The Taylor Swift-inspired boost in turnover for fashion and accessory retailers last month has proved to be temporary with an instant reversal this month,” Ben Dorber, ABS head of retail statistics, said.
Dorber noted that underlying retail turnover remained flat for the past six months, and was only up 0.8% year-on-year in March. This was the weakest pace of growth on record, excluding the COVID-19 pandemic and the introduction of the goods and services tax.
But softer consumer demand is one of the Reserve Bank of Australia’s targets, as it moves to bring down inflation. The bank had hiked rates by over 400 basis points in the past two years.
While the hikes did pull consumer price index inflation off 30-year highs, inflation saw a resurgence in the first quarter of 2024, ramping up concerns that the RBA may have to hike rates again, or keep them higher for longer.
Still, cooling retail spending factors into a softer outlook for inflation.
