Many retailing CEOs say spending is still solid after four rate rises and there’s no sign of the ‘demand destruction’ the RBA is aiming for.
Shoppers are still out spending with gusto. It is something Reserve Bank governor Philip Lowe hoped would have begun to slow as he ploughs on within an attempt to stomp on inflation, with a fifth rise expected on Tuesday.
But consumers have not yet backed off when it comes to buying big-ticket items such as large-screen televisions, a new laptop or a stylish sofa. Household consumption makes up almost 60 per cent of Australia’s total economic output and retail sales surged 1.3 per cent in July to a record $34.7 billion.a large part of it because offshore car manufacturers have been handicapped by a global semiconductor shortage amid supply chain disruptions.
Economists say it takes six months for rate rises to really bite. There is no sign yet of the clamps being put on yet. The brisk activity is both in the bricks and mortar stores and the online business, which made up 23 per cent of David Jones’ total sales in 2021-22.Smaller retailers such as jeweller Michael Hill International and youth fashion retailer Universal Store have also reported strong trading.
Chief executive Daniel Bracken said sales were strong in July and August, with store sales up 18.5 per cent compared with the previous year, which was impacted by store closures in Australia.The next four months are critical when the retailer makes 75 per cent of its annual profits. “As we continue to elevate our brand and focus on craftsmanship, quality and innovation we are capturing a new modern customer,” he added.
A key trend across many retailers is that consumers are still spending even though consumer sentiment measures have plummeted over the past six months.“We expect that higher interest rates will eventually weigh on the consumer. However, the trading updates for the first seven weeks of 2022-23 do not suggest demand destruction is visible yet,” he said.Kmart Group-owned by Wesfarmers,
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