A Slowdown in Price Growth Leads to a Drop in Retail Sales Volumes in Australia in Q4

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Australia’s retail sales volumes dipped in the fourth quarter of the year, and price growth slowed, according to new data released by the Australian Bureau of Statistics (ABS).

The Australian Bureau of Statistics data on Monday showed, “Real retail sales dipped 0.2% in the December quarter to A$96.9 billion ($66.99 billion).”

It was still better than market forecasts of a 0.6% fall, which will significantly drag economic growth. This marks the first time since the past September quarter that Australia’s retail sales have decreased, albeit only slightly.

Growth in the price of goods and services also slowed, with the retail trade volume decreasing by 0.2%. The value of goods sold also decreased, suggesting that inflationary pressures may be softening in Australia’s economy at large.

Australia’s central bank is widely expected to hike rates by a quarter point to 3.35% during its meeting on Tuesday, in light of the recent data released by the Australian Bureau of Statistics (ABS).

Analysts note that the weaker-than-expected retail sales figures imply that consumer spending may not be as robust as previously thought. With inflation softening, it doubts whether a rate hike is necessary to stabilise prices. Despite this, the Reserve Bank of Australia (RBA) is still expected to proceed with the rate hike, given current economic conditions and market sentiment.

Wage growth remains sluggish at 2%. Wages are still expected to rise over time alongside an increase in consumption demand due to lower interest rates and rising house prices, both positive indicators for future economic growth. With this context in mind, economists believe that the RBA will act cautiously when deciding what action should be taken when it meets tomorrow.

Some economists expect retail sales to remain resilient against declining official interest rates, though higher mortgage costs may dampen activity. Therefore, retailers must pay close attention to changing consumer behaviour while adapting their business models accordingly if they remain successful despite ongoing market uncertainty and slower consumer income gains.

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