Australia retail sales fall in Dec 2022

Bloomberg

Australian retail sales declined for the first time in 2022 in December, suggesting consumers are beginning to rein in spending in response to rapid inflation and rising interest rates.
The currency and bond yields slid as sales tumbled by a larger-than-forecast 3.9%, the biggest fall since August 2020. The result came after November’s gain was revised higher to 1.7% as consumers brought forward Christmas spending to take advantage of Black Friday discounts.
“It was a shocking number,” said Diana Mousina, senior economist at AMP Capital Markets which had predicted a 0.5% drop. “Cost of living pressures are starting to bite but I still don’t think this is enough to get the Reserve Bank (RBA) to hold next week.”
Retail sales have been seasonally weak in December in recent times, suggesting further evidence of slowing demand is needed before the RBA pauses tightening.
Resilient consumer spending has been a key factor in its confidence that the economy can withstand higher rates, with a quarter percentage-point hike likely next week.
Money markets imply a peak rate of 3.7% this year while economists expect the central bank will stop at 3.6%, from 3.1% now.
The Australian dollar edged lower after the report as investors weighed the data’s impact on the prospects of further rate hikes, and three-year government bond yields also declined.
Escalating consumer prices and higher borrowing costs have battered consumer sentiment while the re-emergence of overseas travel is threatening to shift spending offshore. Bloomberg Economics expects further weakness into 2023 as the full impact of rate hikes passes through to household budgets.