Summary:

• Analysts’ point to the fall in retail sales volumes as a sign of weak consumer spending;
• Certainly, declining real income growth has made households more cautious with their spending;
• The increase in relative prices had also weighed upon retail spending;
• As has the catch-up spending on services.

The weakness of retail volumes

The volume of retail sales fell in Q2 2023. That was the third successive quarterly decline, only the second time that has happened in the past forty years. The only other time was in 2008. Maybe the GFC played a role then although I suspect rising interest rates was the bigger culprit.

Analysts have pointed to the decline of retail volumes as the clearest sign of weakness in consumer spending. Certainly, there is no lack of supporting evidence for that view, whether that be survey’s about consumer spending intentions on households goods, their declining sentiment about the jobs market or their views about the current state of their household budgets.

To read my full update, click here.

We live in interesting times.

Regards,

Peter Munckton - Chief Economist

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