Retail sales rebounded as cooler temperatures sent Australian consumers flocking back to the shops in search of winter apparel.

Household spending has been subdued to start the year but retail turnover rose 0.2 per cent in May, the Australian Bureau of Statistics revealed on Wednesday.

Although below consensus expectations of a 0.5 per cent lift, the figures are an improvement on the flat result recorded in April, which was driven in part because of unseasonably warm weather putting customers off winter clothes purchases.

NAB forecasters had predicted a 0.6 per cent rise in sales, after the bank’s own transaction data indicated a rebound in May.

On an annual basis, sales rose 3.3 per cent, down from the 3.8 per cent rise over the 12 months to April.

ABS head of business statistics Robert Ewing said the rise in spending for the month was mainly driven by a bounce-back in clothing purchases.

“Retail spending was otherwise restrained this month, with a drop in food-related spending and flat results across household goods,” he said.

Consumer sentiment has been impacted by global trade uncertainty but falling interest rates have boosted confidence.

The Reserve Bank’s decision to cut the cash rate by 25 basis points late in May would have been reflected in part of the figures released on Wednesday.

Another cut is predicted at the board’s next meeting on Tuesday, following softer-than-expected inflation numbers, which should further support consumer spending.

Lenders were already lowering their offerings ahead of the meeting, with ANZ Bank on Wednesday cutting its one- to five-year fixed rate mortgages by up to 35 basis points, making its advertised rates the lowest on offer of the big four banks across every term.

The ABS also reported building approvals rose by 3.2 per cent in May, following two straight months of falls, as apartment consents roared back 11.3 per cent.

Approvals are prone to fluctuation so the rebound could just be the usual volatility exhibited in the data, and not necessarily a sign of a sustained recovery in the trend.

Despite an uptick in approvals in the second half of 2024, the trend has since flatlined, putting Australia’s construction industry on track to fall well short of the national housing accord target of 1.2 million homes in five years.

Property Council chief executive Mike Zorbas said although the target was unlikely to be met, the accord – which had its first anniversary on Tuesday – was a positive signal in spurring decision-makers towards a “culture of yes” that should be applauded.

But that culture must be embedded by moving beyond a one-off agreement to rolling five-year targets, which also include improvements to the planning system and productivity.

Low supply and rising demand caused by falling interest rates have pushed up home prices further, with values rising for the fifth month in a row in June, data released by Cotality on Tuesday showed.

 

Jacob Shteyman
(Australian Associated Press)