Australian Consumers Are Willing to Spend Despite Pessimistic Sentiment

Shoppers walk around Pitt Street Mall in Sydney, Australia, on June 7, 2022. (Brendon Thorne/Getty Images)

Australian consumers are still willing to open their wallets despite having low confidence in the economy as retail spending in May hit record levels.

New data from the Australian Bureau of Statistics (ABS) showed that retail trade rose by 0.9 percent to a record of $34.2 billion (US$23.52 billion) in May, marking the fifth consecutive monthly increase in retail revenue.

“There was growth across five of the six retail industries in May as spending remained resilient,” the ABS director of quarterly economy wide statistics, Ben Dorber said.

“Higher prices added to the growth in retail turnover in May. This was most evident in cafes, restaurants and takeaway food services and food retailing.”

During May, department stores experienced the highest growth, up 5.1 percent from April, followed by cafes, restaurants, and takeaway food services at 1.8 percent, and other retailing at 1.5 percent.

In contrast, clothing, footwear, and personal accessory retailing was the only sector suffering a drop in spending, down 1.4 percent from the previous month.

Shoppers are seen outside the Bourke Street Mall Shopping centre in Melbourne, Australia, on May 3, 2022. (Asanka Ratnayake/Getty Images)

Among the jurisdictions, New South Wales recorded the most significant increase in retail turnover at 1.6 percent. In comparison, Queensland and the Australian Capital Territory experienced falls in retail revenue of 0.4 percent and 0.3 percent, respectively.

Previously, economists had forecast a lower result for May as the Reserve Bank of Australia raised its cash rate by 0.25 percent during the month, the first time in more than a decade.

The followed-up lift of 0.5 percent by the central bank in June, which was the largest increase since February 2000, caused consumer confidence to tumble by nearly eight percent. Since then, consumer sentiment has only partially recovered.

Australian Consumers Still Remain Pessimistic

The ANZ-Roy Morgan consumer confidence index climbed 3.7 percent to 84.7 in the week commencing June 20.

However, the figure was still far below the monthly average of 112.4 and showed that Australian consumers were still overwhelmingly pessimistic.

The confidence index in relation to current economic conditions dropped by 2.5 percent, which was the fourth consecutive weekly decrease.

In a recent report, ANZ bank said that the large savings built up by Australian households during the COVID-19 pandemic were delaying and alleviating the negative impacts caused by ballooning inflation and interest rate hikes.

The bank also expected the growth in household spending to surpass that of GDP in the upcoming months, even though both figures were likely to experience a slowdown.