June sales strengthen, business costs loom

Consumer spending continued its strong trajectory last month, with June retail sales up 11.1% compared to the same month last year. The findings are from Mastercard SpendingPulse, which measures in-store and online retail sales across all forms of payment.

All categories of retail recorded year on year sales growth led by fuel and convenience (up 23.1%), jewellery (up 23.2%), lodging (up 17.9%), home furnishings (up 6.5%), electronics (up 4.8%) and apparel (up 2.4%).

But while sales are increasing, it is not a full reflection of sector performance, says Australian Retailers Association CEO Paul Zahra, with rising labour costs, rents, fuel and energy costs and supply chain constraints all adding to the cost crunch for business.

“The performance of the retail sector is not just marked on sale volumes. We are operating in an inflationary landscape, where consumer prices are increasing, which impacts overall retail trade numbers. This is creating a perception that the sector is thriving. However, many businesses are severely challenged by rising operating costs associated with labour, fuel, energy, supply chains and rents,” says Mr Zahra.

He adds that while consumers are impacted by the rising cost of living, the rising cost of business is in many cases more severe.

“We remain optimistic the retail sector will be able to weather the current economic headwinds and the rising cost challenges. However, we need to acknowledge that just because overall sales are up, it does not necessarily mean that retailers are doing well,” says Mr Zahra.

“As they have through the pandemic, many retailers continue to reduce inflationary shocks for their customers by absorbing some costs, which of course affects their margins. And passing on cost increases has impacted their volumes.”

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