Inflation helps fuel strong Australian retail sales in May

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Seasonally adjusted Australian retail sales grew in May by 10.4 per cent year on year according to data released by the Australian Bureau of Statistics (ABS).

Department stores saw the strongest growth at 5.1 per cent followed by cafes, restaurants and food handling at 1.8 per cent and 0.8 per cent respectively. Sales of household goods rose at 0.4 per cent while other retailing registered a 1.5 per cent increase.

On the contrary, clothing, footwear, and personal accessory retailing recorded a decline of 1.4 per cent in three consecutive months.

On a state basis, NSW recorded the largest retail turnover of 1.6 per cent followed by Victoria at 1.3 per cent and Western Australia at 0.2 per cent. Retail turnover fell 0.4 per cent in Queensland as the state is still recovering from flood damage.

Australian Retailers Association CEO Paul Zahra advised that sales growth is unlikely to be sustainable and only reflects higher consumer prices as a result of inflationary pressures.

“The high sales volumes can be partially attributed to the higher consumer prices we’re seeing across the economy, particularly in the food industries. It’s unlikely we’ll see retail spending maintain these levels as the rising cost of living begins to take hold on family budgets,” Zahra said.

He added leasing costs, rising fuel and energy prices, supply chain disruptions and labour shortages are particular challenges for businesses right now.

“Despite the cost of living and interest rates rises, consumers are still spending necessary items across food, department stores and household goods,” National Retail Association chief Dominique Lamb said, adding that small businesses need more support from the government as the recent rate hikes and additional superannuation impact them more.

“Decision-makers need to be aware that there are thousands of small businesses who are still doing it tough, even though some states and some sectors are thriving,” Lamb concluded.

This story first appeared on our sister publication Inside Retail