Consumer sentiment declined by 3.0% to 83.8 in July 2022, having fallen every month in the 2022 calendar year to date. The continued decline was driven by persistent and growing concerns around inflation and interest rates, and the resulting impact on household budgets. The most recently published ABS retail sales (May 2022) showed a seasonally adjusted increase of 0.9% (noting headline figures are likely driven by inflation rather than volume). Online retail sales fell for a fourth consecutive month, declining by a further 0.9% (seasonally adjusted). Inflation means product and operating costs are likely to put pressure on retailer margins in coming months.
Source: Westpac – Melbourne Institute Consumer Sentiment Index
Consumer sentiment fell by a further 3.0% to 83.8 in July 2022 as reported by the Westpac-Melbourne Institute Index of Consumer Sentiment. The decline represents the eighth consecutive monthly decline. Sentiment has now fallen 29.5% since the high point in April 2021 (118.8), with the cumulative decline since December close to the deterioration seen during the first two months of COVID-19 (-20.8%). The outlook for the economy weighed on confidence, with the component indices tracking expectations around the economy over the next 12 months and next 5 years falling by 4.2% and 6.7% respectively. All component indices are now deep in pessimistic territory.
Source: Australian Bureau of Statistics
The most recently released ABS retail sales data is for May 2022 and shows seasonally adjusted growth of 0.9% in consumer spending. May 2022 sales were $3.22 billion higher than May 2021 sales (+10.4% vs May 2021, +18.7% vs May 2020). The growth in retail sales was driven by growth in department stores (+5.1% in May 2022 compared to –2.5% in April 2022) and consistent growth of cafes, restaurants, and takeaway food services (+1.8%) and other retailing (+1.5%). Sales grew slightly in most states, with South Australia (+1.9%) recording the highest growth whilst Queensland (-0.4%) and the Australian Capital Territory (-0.3%) experienced declines. With ongoing inflation and rate rises expected, consumer discretionary spending is anticipated to slow in the coming months.
Online retail sales
Source: NAB Online Retail Sales Index
Online retail sales contracted for the fourth consecutive month in May 2022 (-0.9%, seasonally adjusted) with the pace of growth slowing in year-on-year terms (+10.4% vs May 2021) compared to April 2022 (+15.2% vs April 2021), consistent with an ongoing moderation of online sales compared to the peaks seen during periods of lockdown. Department stores and fashion recorded growth, while homewares and appliances contracted after strong growth over the prior two years which likely included an element of pull forward of spending in these categories. Online retail sales are estimated to represent 14.7% of retail sales reported by the ABS during the twelve months to May 2022 ($55.96 billion) and are 16.6% higher than the 12 months to May 2021.