Australian retail sales recorded minimal growth in May for the fourth consecutive month, as increased spending on clothing was offset by a rare decline in food purchases—strengthening expectations of an interest rate cut by the Reserve Bank of Australia (RBA) next week.
Markets now assign a 97% probability that the RBA will lower the current 3.85% cash rate by 25 basis points at its meeting next Tuesday. This comes amid sluggish economic growth and diminishing inflation concerns.
Following the data release, the Australian dollar fell 0.2% to US$0.6569.
According to the Australian Bureau of Statistics (ABS), retail sales edged up just 0.2% in May, following no change in April. The figure missed market expectations of a 0.4% increase and highlighted persistent weakness in consumer spending.
Total sales reached A$37.3 billion (S$31.2 billion), representing a 3.3% year-on-year increase—the slowest annual pace since November 2023.
The weak sales data follows a recent consumer sentiment survey for May, which showed pessimists continue to outweigh optimists.
“Households remain cautious, with many choosing to save the gains from earlier rate cuts instead of increasing their spending,” said Harry Murphy Cruise, head of economic research and global trade at Oxford Economics Australia.
“This report adds more weight to the case for a rate cut at the RBA’s upcoming meeting.”
Food retail sales declined by 0.4%—the first monthly drop in 2025—while spending at cafes and restaurants remained flat. In contrast, apparel sales rose by 2.9% and department store spending climbed 2.6%, although these increases followed significant declines in April.
