Australian Bureau of Statistics figures find retail sales slowing

Retail sales shrank by 3.9 per cent in December, the first decline in 12 months, dragging annual growth in turnover down to 7.5 per cent, according to the Australian Bureau of Statistics.

The result suggests action by the Reserve Bank of Australia to crimp demand by sharply increasing interest rates may be gaining traction.

Retail turnover reached $34.47 billion in December, down a recent high of $35.87 billion reached the previous month.

The result will complicate the task facing the Reserve Bank Board when it meets next week to decide whether or not to raise its cash rate, currently at 3.1 per cent.

A surge in inflation to 7.8 per cent in the December quarter has fueled speculation the central bank will hike rates at its February 7 board meeting.

HSBC Australia chief economist Paul Bloxham said the figures indicated core inflation was yet to slow despite the Reserve Bank of Australia's aggressive tightening of monetary policy since May.

Mr Bloxham said the result meant a rate rise to 3.35 per cent on February 7 was "highly likely" and he expected a further hike to 3.6 per cent in March.

Higher interest rates and stubborn inflation continue to weigh on the mood of households, according to the ANZ-Roy Morgan consumer confidence index.

While the index increased by 0.9 points last week to 86.8 points, it remains well below the long-term average, indicating people remain subdued in their outlook.

The latest retail figures suggest this downbeat mood may be starting to affect consumer behaviour.

But the picture is complicated. Some retailers reported bumper trading conditions in the lead-up to Christmas. JB HiFi, the nation's largest consumer electronics and whitegoods retailer, reported very strong trade in the second half of last year. Sales increased 8.6 per cent in the period to reach $5.3 billion - a record return for the chain.

Economists think the tight labour market and improving wages growth is giving some consumers the confidence to spend despite rising living costs eating deeper into household budgets.

READ MORE:

The unemployment rate was at 3.5 per cent late last year and the wage price index measured by the Australian Bureau of Statistics accelerated to 3.1 per cent in the year to September. Other measures suggest pay gains may be even stronger.

Using data collected from more than 220,000 small and medium businesses, staffing and payroll software company Employment Hero reports that median hourly wages, including penalty payments and bonuses, grew 8.2 per cent in the 12 months to December.

Founder and chief executive Ben Thompson said wage gains were particularly strong in Canberra, jumping 10 per cent last year - the fastest rate in the country.

Mr Thompson said workers in the ACT were benefiting from high demand for staff at a time of limited supply.

Employment Hero figures show employment among small and medium businesses in the ACT increased by 10.6 per cent in 2022, and demand was particularly strong among employers in retail, hospitality and tourism.

We've made it a whole lot easier for you to have your say. Our new comment platform requires only one log-in to access articles and to join the discussion on The Canberra Times website. Find out how to register so you can enjoy civil, friendly and engaging discussions. See our moderation policy here.