SYDNEY — Australian retail sales plummeted in December due to the combined effects of last year’s record interest rate hikes and the worst cost of living crisis in 30 years.
Retail sales fell 3.9% in December, the first decline in 11 months, more than offsetting a 1.7% increase recorded in November, the Australian Bureau of Statistics said on Tuesday.
Last year ended with talk that the Reserve Bank of Australia may need to continue its aggressive rate hikes in early 2023. House prices have also retreated and consumer confidence has plunged into recession-like lows.
The RBA is watching the upcoming big shift from low fixed rates to much higher floating rates among mortgage holders. The change is expected to increase average annual mortgage payments by thousands of dollars.
Declining retail sales could serve as a warning to central banks to act cautiously at next week’s first-of-the-year policy meeting or risk a hard landing for the economy.
Some economists have already warned that the risk of a recession would rise if the RBA continued to raise rates rapidly despite lower future inflation indicators such as labor costs.
Inflation data in the fourth quarter showed the RBA still needed to put the brakes on policy, but business surveys clearly showed that inflationary pressures are easing this year, with the labor market Data show that chronic labor shortages are now easing.
Some of the weakness in retail spending in December was attributed to significant store discounts in November, popular with consumers looking for bargains before Christmas.
Ben Dover, head of retail statistics at ABS, said: “December’s sharp decline suggests retail spending is slowing due to high cost-of-living pressures.
Department stores saw the biggest drop in sales in December, down 14.3% from November, according to ABS. Clothing, footwear and personal items retailers fell 13.1%.
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