The buoyant consumer spending that fueled a stellar corporate earnings season may be running out of steam as retail analysts bet the recent rate hike will lead to a slowdown going into the holiday season.
Reserve Bank Governor Philip Lowe hinted in a speech last week that the pace of rate hikes could slow soon, but the latest 50 basis point hike has already prompted a hefty dose of caution about the consumer outlook.
“Looking ahead, we are becoming increasingly cautious about the consumer outlook as savings rates fall, costs rise and the full impact of rate hikes has not yet reached household cash flows,” said Jarden analyst Ben Gilbert and his team.
Jarden’s monthly online retail tracker indicates a slowdown in sales, with an average 16 percent drop in web traffic for the country’s big brands.
Meanwhile, the UBS team notes that the country’s retail stocks were in a strong position ahead of the earnings season, but reported results were not enough to support a sustained share price recovery.
“Looking ahead, rising living costs are expected to weigh on revenue growth from the end of CY22E, supply chain costs are beginning to fall, but recent increases are annualized in FY23E and cost pressures in labor and rent are expected to remain challenging ‘ it said analysts in a note to clients last week.
Grocery wholesaler Metcash reported robust spending last week as it showed sales across the group had risen 8.9 percent in the first few weeks of 2023. The company pointed out that inflation played some role in these increased sales, while the future impact of inflation on customers was not clear.
Macquarie has noted that it is currently difficult to determine whether sales growth across the retail sector is due to the price of goods sold or to the volume of goods sold.
“Inflation remains high and will likely drive much of the growth we’re seeing across the system,” analysts at Macquarie said in a report last week.