Retail spending edged up in May as sales in the locked-in Victoria fell, weighing heavily on the national result.
Preliminary retail figures from the Australian Bureau of Statistics for May showed spending rose 0.1% to $ 31.1 billion, following a 1.1% increase in April.
However, spending fell 1.5% in Victoria as the state entered its fourth lockdown, restricting trade for high street stores.
The Melbourne lockdown remained in place until June 9, suggesting this could weigh on the June sales report as well.
âEvery lockout comes at a significant cost, and there is now no safety net for retailers,â said Paul Zahra, CEO of the Australian Retailers Association.
“As we have seen over the past month in Victoria, and now in Sydney – the COVID threat is far from over and new cases can quickly emerge despite our best efforts to contain the virus.”
Still, sales rose 1.5% in Queensland and Western Australia, and the modest overall national increase in May still left spending 7.4% higher than the previous year.
“Overall, the outlook for consumer spending remains positive due to high confidence, strong labor market recovery, rising asset prices, border closures and excessive household savings. “said Ryan Felsman, senior economist at Commonwealth Securities.
Even comments suggesting that the Reserve Bank of Australia might advance the timing of a cash rate hike would still leave borrowing costs at extremely low levels for the foreseeable future, another positive for retailers.
Westpac chief economist Bill Evans said last week’s jobs report had “changed the game” with the unemployment rate unexpectedly dropping to 5.1% and returning to its low level. ‘before the pandemic.
It’s way ahead of what the RBA and Treasury expected.
The RBA has repeatedly stated that an increase in the cash rate from its all-time low of 0.1% will not happen until the inflation rate hits the two to three target. percent, which will require a three percent wage increase and an unemployment rate closer to four percent.
He didn’t expect to see these events until 2024 at the earliest.
But Mr Evans expects those conditions for a rate hike to be met by early 2023 and expects a rate hike of 0.15% in the first three months of this year.
This would be followed by an increase of 0.25% in the June 2023 quarter and an additional 0.25% in the December quarter.
“This would reduce the cash rate to 75 basis points (0.75%) by the end of 2023, thus reversing the ’emergency’ rate cuts in 2020 when the RBA responded to the COVID crisis.” , said Evans.
AMP Capital chief economist Shane Oliver says there is a risk that a rate hike will occur in late 2022, while BetaShares chief economist David Bassanese believes a hike could be brought forward to mid-2022.
Associated Australian Press