Australian retail sales contracted 0.4% in March due to inflation and high interest rates – Australian retail sales unexpectedly shrank in March as consumer spending remained under pressure from sticky inflation and high mortgage rates, a trend expected to continue in the coming months.

Data released by the Australian Bureau of Statistics (ABS) on Tuesday showed a quarterly decrease of 0.4% in March. The data was weaker than expectations for a 0.2% increase and a sharp reversal from February's 0.3% increase.

A series of concerts by pop star Taylor Swift boosted spending in February, but the trend did not carry over into next month. Retail spending remains largely under pressure from rising costs of living.

Ben Dorber, head of retail statistics at the ABS, said: “Last month's growth in sales for fashion and accessories retailers, driven by Taylor Swift, proved to be temporary, with the situation immediately reversing this month.

Dorber pointed out that underlying retail sales have remained stable over the past six months, growing only 0.8% year-on-year in March. This was the weakest growth rate ever, excluding the COVID-19 pandemic and the imposition of the Goods and Services Tax.

But weak consumer demand is one of the targets as it aims to reduce inflation. The bank has raised interest rates by more than 400 basis points over the past two years.

While the rate hike did take inflation off a 30-year high, a resurgence in inflation in the first quarter of 2024 heightened concerns that the RBA may have to raise rates again or keep them higher for longer. interest rate concerns.

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Still, cooling retail spending has led to a softer outlook for inflation.

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