- Retail trade fell by 0.2% in October, the first fall this year.
- Spending was lower in all the major categories with the exception of food.
- The next few monthly retail trade prints could be difficult to interpret given the Black Friday sales period and the difficulties seasonally adjusting the data due to changing spending patterns.
Today’s retail trade for October was weaker than expected falling by 0.2%/mth (CBA (f) flat, consensus +0.5%). This is the first monthly fall in 2022. We had flagged a weak outcome as indicated by CBA’s card spending data.
There were falls in all the major categories in the month with the exception of food (+0.4%). Strong growth in prices is supporting the food category. Over the year to September food prices have risen by 8.5% according to the retail trade deflator.
Department stores posted the largest fall in October, down by 2.4%. Some consumers may have held back spending in this category ahead of the November Black Friday sales period. Clothing and footwear ( 0.6%), household goods ( 0.5%) and other retailing ( 0.2%) were all lower. Eating out fell by 0.4% in October after a solid lift in September courtesy of the additional public holiday. More detailed data on spending by category is released on 2 December.
Retail trade was either flat or lower across all jurisdictions in October. The smaller jurisdictions of Tasmania ( 1.7%), the NT ( 1.8%) and the ACT ( 1.4%) had the largest falls.
The monthly retail trade prints will get interesting over the next few months thanks to the November Black Friday Cyber Monday sales activity. With this sale period growing in popularity over the years, as well as disruptions to spending in recent years because of pandemic lockdowns and restrictions, the seasonal factors may be more difficult than usual for the ABS to calculate.
Any irregularities in the seasonal factors can throw around the monthly growth rates for the headline seasonally adjusted series and can result in some volatile or misleading numbers. The result is that it may take until the data for early next year is released before we get a true picture of the spending pulse from the ABS retail trade data over this period. CBA’s card spending data for the week ending 25 November (released tomorrow) will provide an indication of Black Friday sales activity. The following week’s data will capture the full Black Friday to Cyber Monday period.
Looking beyond the next few months we expect a clear slowing in retail trade and consumer spending more generally. Rising interest rates and the roll off of ultra low fixed rate loans over 2023 and 2024 will place significant pressure on household budgets. High inflation is also cutting into the volume of consumer spending. A slow down in consumer spending will help reduce domestic inflationary pressures. In his testimony to the Senate today Governor Lowe said that around half of recent high inflation outcomes are a result of strong demand, with the other half caused by supply issues.
CBA’s Global Economic and Markets Research (GEMR) team publishes a wide range of economic and financial research each week covering the latest data, trends, policy developments and topical issues in Australia and other major economies. To access these publications please visit the GEMR website.
Our Economic Expert
Kristina Clifton joined the Commonwealth Bank in 2016 as an economist responsible for analysing and communicating trends and developments in the Australian economy, before transferring to the International and Sustainable Economics Team in 2022. Prior to joining Commonwealth Bank, Kristina spent 10 years at the Reserve Bank of Australia (RBA) analysing Australian and international financial markets and as a dealer in the domestic market operations section of the RBA. Prior to this Kristina worked for 2 years as a market economist at the NAB. She holds a Bachelor of Applied Finance (Hons) degree from Macquarie University.