Australia’s March Retail Sales Hit 14-Month Low

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In an exemplary signal for consumer spending, Australian retail sales experienced their slowest annual growth rate in 14 months during March. The situation is expected to worsen following an unexpected increase in interest rates earlier this week.

According to data released on Wednesday, retail sales in March saw a modest increase of 0.4% compared to February, which only increased by 0.2%. The total sales for March reached A$35.31 billion ($23.53 billion), showing a 5.4% growth compared to last year. However, this growth rate is lower than the 6.4% recorded in February.

Economist Marcel Thieliant from Capital Economics has indicated that sales volumes in the first quarter likely declined approximately 0.5% compared to the previous quarter.

“While retail sales values rose at a decent pace in March, we estimate that sales volumes fell the most since 2021’s lockdowns last quarter, and that weakness has further to run,” said Thieliant.

“We think consumption growth will slow to around 0% q/q this quarter and next.”

Households are anticipated to face increased financial pressure following an unexpected move by the Reserve Bank of Australia to continue to raise interest rates to the highest level in a decade, reaching 3.85% on May 2. This decision caught a majority of economists off guard, as many anticipated an extended pause in rate hikes.

RBA Governor Philip Lowe warns of the urgent need to control inflation promptly while maintaining the projection that it will reach the upper end of the 2-3% target range by mid-2025.

Regarding the interest rate hike, Treasurer Jim Chalmers expressed concern about the country’s economic challenges. 

“It was a pretty, brutal reminder of the economic challenges, particularly this inflationary challenge. And a difficult day for Australians who are already under the pump.”

The combination of sluggish retail sales growth and the unexpected interest rate hike has raised concerns about the resilience of consumer spending and the overall state of the Australian economy.

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