First fall in retail sales in over a year

Retail spending has fallen for the first time in 14 months and there’s little sign of a recovery ahead.

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Spending dropped 0.1 per cent to $24.3 billion in July, after enjoying a 0.6 per cent rise in June.

The fall was driven by a 1.9 per cent fall in spending on household goods, which had been very strong over several months thanks to the booming housing market.

The federal budget may also have played a part, with businesses taking advantage of generous tax breaks on new purchases before the end of the financial year, St George senior economist Janu Chan said.

“Household goods retailing, which includes electrical goods, and spending on home improvements, items which tend to be claimed for tax deductions, fell,” she said.

Over the 12 months to July, retail spending rose 4.2 per cent, and household goods purchases were up 8.6 per cent, easing from the double-digit growth in 2014.

JP Morgan economist Ben Jarman said a fall from June’s strong spending was inevitable, noting that sales of pharmaceuticals, cosmetics, newspapers and books had all dropped.

“It breaks the run of a couple of slightly better months,” he said.

Mr Jarman said global market volatility may impact consumer confidence and the next few months of sales.

“July is too early for recent equity market wobbles to have hit the retail spending data,” he said.

Ms Chan doubted that spending would return to the heights enjoyed earlier in 2015 while consumer confidence remains sluggish.

Westpac’s August measure of consumer sentiment rose, but at 99.7 points is below the 100 mark, meaning pessimists about the economy are outnumbering optimists.

“Concerns are lingering among households regarding the outlook, as indicated by consumer sentiment surveys,” she said.

“Additionally, weak income growth is weighing on consumers ability to increase spending.”

But Retail Council chief executive Anna McPhee was happy with the retail sector’s recent performance.

“Discretionary spending year on year is operating above its long-term average,” she said.

HOW AUSSIES SHOPPED IN JULY

* Sporting goods, toys and media down 4.1pct

* Electrical and electronic goods down 3.3pct

* Hardware, building and garden supplies down 1.4pct

* Shoes and personal accessories up 3.9pct

* Clothing up 2.3pct

* Takeaway food up 1.4pct

* Department stores up 1.3pct

* Liquor up 0.2pct

Source: ABS seasonally adjusted numbers