Australian consumer spending stalled in July, amid concerns households may be restricting spending in the face of high debt levels and stagnating wages. According to the ABS, retail sales figures recorded zero growth while the market had expected growth of +0.2%.
Bond yields largely ignored the soft data and followed offshore leads to finish the day higher. Yields on 3 year and 10 year bonds both increased by 4bps higher at 2.01% and 2.64% respectively while the local currency dropped from 80.10 U.S. cents to 79.80 U.S. cents during afternoon trading.
The growth figure was down from June’s growth rate of +0.2% and May’s growth rate of +0.6%. On a year-on-year basis, retail sales grew by 3.6%, down from the 3.7% annual rate recorded in June. This makes July the third month in a row where the growth rate has fallen.
ANZ senior economist Jo Masters pointed out retail “sectors exposed to international competition struggled”. She also noted a lot of the weakness originated from NSW even though other states, such as Victoria and Queensland, recorded “robust” increases. However, regardless of state, household spending was at the mercy of stagnant incomes and high debt levels. “Softening retail sales is consistent with our view that households will struggle to sustain consumption growth above income growth, particularly given weak wage growth and high levels of household debt and we continue to see the consumer as a key risk to the economic outlook.”