Retail turnover lifts 0.7% in August driven by warmer weather

Cafes, restaurants and takeaway food services were up 1% and food retailing increased 0.6%.

All states and territories increased, but unseasonal rainfall in some parts of Western Australia reduced sales slightly compared to eastern counterparts.

The context: Spending activity is in focus for economists with inflation continuing to remain above the RBA's target band, on an underlying basis, as other global economies start to cut rates. The retail sector has felt the brunt of higher interest rates as some households cut back their spending, particularly on discretionary items, and savings buffers are slowly spent down.

The RBA’s Financial Stability Review found a rise in businesses across various industries entering insolvency since the beginning of 2024. The review found hospitality was the most affected, which is reliant on discretionary spending. While non-bank lenders appear to be reporting declining arrears in business loans across industries, one of the exceptions is retail trade where arrears are increasing for some operators.

However, the central bank’s most recent Statement on Monetary Policy indicated that household consumption has been stronger than it previously estimated. But price sensitive consumers are cutting back and the RBA’s liaison program found that retailers and hospitality firms were reporting subdued underlying demand.

Expectations for the year ahead were found to be mixed, with some thinking poor conditions would continue and others optimistic due to stage 3 tax cuts, expected lower inflation and wages growth. The Reserve Bank flagged a risk that household consumption picks up more slowly than expected, which would put downwards pressure on input costs and inflation.

What they said: "Retail spending was boosted this month by warmer-than-usual weather for this time of year," ABS head of business statistics Robert Ewing said.

"This year was the warmest August on record since 1910, which saw more spending on items typically purchased in spring. This included summer clothing, liquor, outdoor dining, hardware, gardening items, camping goods and outdoor equipment.

“The lift in turnover from the warmer weather was also boosted by higher discretionary spending as consumers took advantage of Father’s Day sales events during the month."