August 2022 Retail Sales

Retail sales figures are out for last month and they best expectations again. Retail spending was up 0.6% on last month against expectations of a 0.4% increase. Year on year spending is up 19.2%. However this isn't the best comparison because August last year was impacted by lockdowns. A better comparison is to spending in February 2020, before COVID really began to impact the economy and spending since then is up a remarkable 25.2%.

Every category of spending remains well ahead of trend, which really highlights just how robust household consumption has been. In August growth was driven mainly by department stores (up 2.8%), household goods (up 2.6%), and the cafe and restaurant sector (up 1.3%).

The clothing and soft goods (down 2.3%) and other retail (down 2.5%) sectors saw fairly significant declines. However, it's worth noting that these sectors have also seen the most growth since February 2020.

Despite poor consumer sentiment and 2.25% of interest rate increases, households continue to spend and the longer household spending remains elevated, the bigger the risk that inflation remains high. It seems the key driver of continued strong spending is the robust employment market. As long as households feel they have secure employment, they are continuing to spend.

This is going to be a key conundrum going into next week's meeting for the RBA.

It will also be interesting to see how these figures look in-light of the ABS's first release of monthly CPI figures, due out tomorrow.