Investing.com– Australian retail sales tumbled in December, data showed on Tuesday, as spending was strained by rising living costs and as a bulk of holiday shopping appeared to have already occurred in the prior month.
Retail sales slumped 3.9% in December from the prior month, data from the Australian Bureau of Statistics (ABS) showed. The reading broke 11 consecutive months of rises, and was far worse than expectations for a decline of 0.3%.
Increased inflation appeared to be the biggest driver of the slowdown, as the Australian consumer price index growing more than expected in the fourth quarter to an over 30-year high. This trend in inflation is also likely to spur more interest rate hikes by the Reserve Bank, which in turn is expected to contribute further to cost of living pressures.
The sharp decline in retail sales also comes after a better-than-expected reading in November, as Australians used increased Black Friday discounts to do a bulk of their holiday shopping in advance. The ABS noted in a release that businesses that saw the highest retail turnover in November logged the biggest decline in sales through December.
“Retail businesses reported that many consumers had responded to (cost of living) pressures by doing more Christmas shopping in November to take advantage of heavy promotional activity and discounting as part of the Black Friday sales event,” said Ben Dorber, ABS head of retail statistics.
Turnover from department stores and apparel retailers marked the biggest declines during the month, while food retailing- a major driver of retail sales in 2022- was the only industry to log a rise in December.
Separately, housing credit and private sector credit also declined in December from the prior month, indicating that consumers were growing more skeptical of taking on debt due to high interest rates.
Australian consumers are facing increased pressure from high inflation, sluggish wage growth and rising interest rates. This saw consumer sentiment recently tumble to 2020-lows, with the country growing increasingly pessimistic over the economic outlook.
Rising inflation and interest rates are also expected to stymie economic growth in the fourth quarter and potentially early-2023, with the RBA set to keep raising interest rates in the near-term.
The Australian dollar shrank 0.2% after the retail sales reading.