Australian retail sales rose only marginally in May, bolstering expectations that the Reserve Bank of Australia (RBA) will deliver a third rate cut next week as the economy continues to show signs of strain.
Retail turnover edged up 0.2% month-on-month in seasonally adjusted terms, following a flat April and falling short of market expectations for a 0.4% rise.
Annual growth stood at 3.3%, data from the Australian Bureau of Statistics (ABS) showed on Wednesday.
“Retail spending rose in May driven mainly by a bounce-back in clothing purchases,” said Robert Ewing, head of business statistics at the ABS.
“Retail spending was otherwise restrained this month, with a drop in food-related spending and flat results across household goods.”
The modest headline increase masked underlying softness across major categories. Food retailing fell for the first time this year, down 0.4% overall amid a 0.4% decline in supermarket and grocery sales and a 1.3% fall in liquor retailing.
Household goods were flat, with gains in hardware and furniture offset by a 1.1% drop in electrical and electronics.
The strongest growth came from clothing, footwear, and personal accessory retailing, which jumped 2.9%, led by a 3.5% rise in clothing.
Department store sales also rose 2.6%. In contrast, other retailing declined 0.2%, and cafes, restaurants, and takeaway food services were unchanged.
Online sales dipped 0.6% to $4.49 billion in May after rising in April. Through-the-year online retail was up 8.4%, highlighting the longer-term shift in consumer behaviour.
The weak retail figures support market pricing for a third RBA rate cut next Tuesday.
ASX's RBA Rate Tracker currently indicates a 97% expectation of an interest rate decrease to 3.60% at the next RBA Board meeting.
The RBA has already cut rates twice this year, with policymakers citing cooling domestic inflation amid deteriorating global trade conditions driven by President Donald Trump’s tariff regime.
A soft May inflation reading has prompted many economists to bring forward their forecasts for the next rate move to July from August.
Meanwhile, building approvals rebounded in May, although results were uneven and suggest the construction sector remains under pressure.
The total number of dwellings approved rose 3.2% to 15,212 in seasonally adjusted terms, following a 5.7% fall in April.
The lift was driven by a sharp 11.3% increase in private sector dwellings excluding houses, which followed a steep 19.0% drop the month prior. Approvals for private sector houses rose just 0.5%.
“Private dwellings excluding houses rose 11.3% in May, driving the overall increase in dwellings approved,” said Daniel Rossi, head of construction statistics at the ABS.
Approvals rose sharply in Victoria and New South Wales, up 14% and 11%, respectively, while declining in Tasmania, Western Australia, Queensland, and South Australia.
However, the value of total building approvals fell 8.6% to $15.45 billion, due to a 22.4% plunge in non-residential construction, which followed a strong April.
Residential building value rose 3.6%, to $9.28 billion.
