Retail spending dives as RBA meets



Retail spending tumbled 4.4 per cent in December after several months of exceptionally strong results as the economy emerged from COVID-19 lockdown late last year.

The weaker than expected outcome came as the Reserve Bank of Australia holds its first board meeting of the year.

The Australian Bureau of Statistics said the December result for retail trade followed a 7.3 per cent increase in November, a 4.9 per cent rise in October and a 1.3 per cent lift in September.

ABS director of quarterly economy-wide statistics Ben James said December’s 4.4 per cent fall was the largest monthly decline since April 2020.

However, December’s monthly turnover of $31.9 billion was the second highest level in the series following a record $33.4 billion in November.

Still, consumer confidence — a guide to future household spending — improved further in the past week as falling Omicron cases appeared to outweigh rising inflation pressures, which have sparked speculation of an official rate hike this year.

The ANZ-Roy Morgan consumer confidence index rose 1.7 per cent to 101.8 in the past week, continuing its recovery from a slump to 97.9 in mid-January when infections were at their peak.

ANZ head of Australian economics David Plank said the rise in confidence was mainly driven by a 6.2 per cent jump in NSW after three weeks of decline.

But he said a more surprising shift was a 0.3 percentage point fall in inflation expectations to 4.7 per cent, despite annual inflation unexpectedly growing to 3.5 per cent and petrol prices rising seven per cent in January.

Meanwhile, manufacturing has been further hit by supply chain disruptions and staff shortages over the summer months, cutting short the improvement in the industry after last year’s COVID-19 lockdowns.

Ai Group chief executive Innes Willox said cost pressures are also being felt across the sector, with input prices continuing to rise and selling prices only partially recovering these outlays.

The Australian Industry Group performance of manufacturing index dropped 6.4 points over December and January to 48.4, indicating a modest contraction in the sector with the index under 50 points.

“The new orders index fell steeply pointing to a reduction of confidence among businesses dealing with new implications of the COVID-19 pandemic,” Mr Willox said.

The impact of the Omicron variant on the economy will be taken into account at the RBA’s meeting.

But rising inflation and a sharp drop in the unemployment rate is expected to see the RBA rethinking its guidance on the interest rate outlook, while economists predict it will end its bond buying program this month.

Financial markets are pricing in the risk of a rise in the cash rate from a record low 0.1 per cent by mid-year, while economists appear to be gravitating to the August board meeting.


We’ve Already Come Too Far To End This Now.

Subscribe To Our Weekly Newsletter

Get notified about new articles