While retail sales have started 2023 at a healthy run-rate, a downturn is looming. In this report, we detail our forecast for retail sales and emphasise that the June 2023 quarter is likely to be much weaker in non-food with food retailing propped up by inflation. The downturn is just commencing and likely to last until the end of 2024. We forecast retail sales growth of 2% in 2023, compared with 11% achieved in 2022 and long-term trends of 5%.

We have upgraded our retail sales outlook for FY23e given such a strong start to the fiscal year and the benefit that wages growth and inflation will have on sales over the next six months. We forecast retail sales growth of 6.0% (prev 3.4%) for FY23e and 0.8% for FY24e (prev 2.4%). The weakest period of sales growth is likely to be the December 2023 half in our view, making the downturn still some time away. We are watching retail inflation closely.