Home » ‘Nasty’ inflation numbers could deliver a rate rise despite retail discounting frenzy

‘Nasty’ inflation numbers could deliver a rate rise despite retail discounting frenzy

‘Nasty’ inflation numbers could deliver a rate rise despite retail discounting frenzy

Australia’s struggling retail sector has been given a glimmer of hope, with rolling sales encouraging shoppers to spend — but economists warn that it may come with the price of another interest rate hike by the Reserve Bank.

The recent jump in retail spending, boosted by clothing and footwear retailers offering big discounts and earlier-than-usual sales seasons, has increased expectations of an interest rate hike in August as the entire retail sector navigates a cost-of-living crunch.

Official figures released by the Australian Bureau of Statistics last week showed retail spending rose by 0.6 per cent in May, while spending only increased by 1.7 per cent for the year.

Most of the increase was in clothing and footwear, with customers being enticed to spend their cash with retailers offering big discounts and longer — or more frequent — sales.

It’s a trend that has paid off for APG and Co — the company behind Saba, Jag and the brand worn by the Australian Olympic team, Sportscraft.

“Discounting absolutely draws the customer in,” CEO Elisha Hopkinson told The Business.

“You can see that across the market, people are not spending more overall. And so it’s definitely a competitive game out there of who’s doing the best job.”

Offering sales and discounts has encouraged people to spend on non-essential items like clothing.(Unsplash: Charles Deluvio)

Ms Hopkinson said that while it was unsurprising that customers were being cautious with their spending given cost-of-living pressures, people were willing to spend when they were able to justify purchases.

“When there’s not a market event, such as Mother’s Day or a change of season getting colder, or an end-of-season sale period, we have had to use discounts a little bit more to entice customers to come into stores,” she said.

Customers were also being more discerning with what they buy, she added.

“They’re absolutely being more careful with their money, and they are purchasing lower-price-point items,” Ms Hopkinson said.

“It may be a T-shirt versus a knit, and so our job really is to just make sure that we can outfit our customers … so they’re spending more with us as they leave the store.”

A red sign with white block letters that read "Sale" in a shop front window.

Retailers have been holding more regular sales or discounts to encourage people to spend.(ABC News: John Gunn)

Sales supporting ‘quite weak’ sector

While bigger discounts and earlier sales seasons may have encouraged people to spend, the retail sector is still doing it tough.

“When we take that step back, it’s quite clear that the retail sector overall remains quite weak, and that many households need these discounts and these incentives in order to go out and spend like they used to,” Indeed economist Callam Pickering told The Business.

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