Australian retail sales rose 15.8% year on year in July 2022. The three-year compound annual growth rate for July was 8.3%, broadly similar to June 2022 at 7.8%. The year on year growth will be very noisy over July-October given lockdowns from last year. We focus on growth vs 2019 and on that score, recreational goods, apparel, footwear and jewellery had the strongest growth in July 2022. In our view, retail sales will remain firm with the first signs of weakness possible in November 2022. Retail sales are likely to be softer in 2023 given lower household income growth.

Australian retail sales rose 12.2% year on year in June 2022. The three year compound annual growth rate for June was 7.8%, significantly above long term trends around 5%. Drilling down into categories, the strongest were cafes & restaurants and fashion. The only spot of weakness was fresh food specialists. In our view, retail sales will remain strong through the next four months lapping lockdowns from a year ago, with the first signs of weakness possible in November 2022. Retail sales are likely to be weak in 2023 given lower household income growth.

Australian retail sales rose 10.3% in May 2022. While it is a slowdown from April’s growth rate of 11.1%, the moderation in growth is mild, particularly given the pressures on consumers from higher interest rates and petrol prices. The Easter boost to supermarkets, liquor and apparel has faded, but all categories did well in May other than takeaway food which was up only 2.5%. In our view, April 2022 was the peak of retail sales and growth will slow each month going forward. Negative headlines may hit sales briefly, but the more fundamental slowdown associated with lower household incomes is more a risk to 2023 sales growth.

Australian retail sales rose 11.1% in April 2022. This is a remarkable growth rate with a three-year CAGR of 9.1%. The detailed disclosure by the ABS showed a meaningful acceleration in supermarkets, liquor and department stores. We attribute this move to the rebound in domestic tourism given school holidays in April. Even though we are positive on retail spending, these growth rates are unlikely to persist. We think April is the peak with a gradual slowdown this calendar year and more noticeable one in 2023.