The Australian Bureau of Statistics (ABS) has reported a sharp decline in Australia’s retail sales in December, the largest drop in over two years. The ABS attributes the decrease to the impact of rising borrowing costs and high inflation on consumer spending.
According to the ABS, retail sales fell 3.9% from November, after 11 consecutive months of gains. This decrease is the steepest since August 2020, when the country was implementing lockdown measures due to the COVID-19 pandemic. The fall was also significantly higher than the average expected drop of 0.3%.
The luxury sector was hit the hardest, with department store sales falling 14.3% in December. Analysts at Australia and New Zealand Banking Group (ANZ) predict that growth in consumption will slow through 2023 as a result of higher interest rates and a recent drop in real wages due to soaring inflation.
This drop in retail sales raises concerns about the overall state of the Australian economy and could reduce the need for tighter monetary policy. The data highlights the challenges faced by the country as it navigates the impact of high interest rates and inflation on consumer spending.