Retail Sales In Australia Unexpectedly Declined In October

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For the first time this year, Australian retail sales dropped in October due to inflation and high-interest rates preventing consumers from spending as much money.

According to preliminary data from the Australian Bureau of Statistics (ABS), retail sales declined by 0.2% in October compared to the previous month. The data came in below expectations for growth, missing the mark by 0.1%. It is a significant drop from September’s reading of 0.6%.

For the first time, retail sales have declined since December 2021, indicating that household spending is under increasing strain from high inflation and interest rates. Australian consumer inflation soared to a new 32-year high in the third quarter, while the Reserve Bank’s benchmark interest rate reached a nine-year peak.

All industries except for fresh food had a severe drop in retail spending during October, the ABS stated. Out of all the industries, department stores experienced the most significant decline.

For the first time since January, spending on restaurants and food delivery – a primary source of revenue this year – has decreased.

According to Ben Dorber, head of retail statistics for ABS, “The October fall in retail turnover ends a run of nine straight monthly rises and suggests the increased cost of living pressures, including interest rate rises, have started to weigh on consumer spending.”

After the disappointing news, Australian currency tumbled down 0.5%, trading at 0.6715 dollars. The data from Monday suggests that economic growth in Australia will start to slow after an earlier post-COVID surge.

A decrease in consumer spending is often an early indicator of an economic recession. In this case, the Reserve Bank was right to pause its plans to increase interest rates recently.

By raising rates by only 0.25% during its last two meetings, the central bank is trying to establish a balance between inflation control and high-rate economic growth reduction.

Australia’s economy might also begin to decline because of China’s slowing growth; as the market tries to contain COVID-19 outbreaks and civil unrest concerning its anti-COVID policy, it will have more difficulty exporting.

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