Australian consumers have kept their wallets open for a second month in row, according to May retail sales figures released by the ABS. Sales grew by 0.7% over the month, which is well over the +0.2% growth expected and a continuation of the strong result in April. On a year-on-year basis, sales grew by 3.8%, which is the highest annual rate since March 2016.
Some economists do not expect the high rates to continue. ANZ’s Daniel Gradwell said, “The recent increase in spending is a welcome development, but we remain sceptical of its longevity given the number of headwinds that households are facing…such as soft wages growth, slower house price increases, high leverage and out of cycle mortgage rate increases, all of which are likely to weigh on spending going forward.”
Deutsche Bank’s Adam Boyton took a similar view but related his thinking to overall consumer sentiment. “In our view a sustained 0.5% (month on month) growth rate is at odds with the current level of consumer sentiment. As a result, we would expect a softer pace of growth in retail sales over coming months. We also expect utility price increases from 1 July to have a negative impact on sentiment, ‘free’ household cash-flows and consumer spending as we move through the September quarter.”