Retail spending cools in December as consumers pull back after Black Friday

Retail spending grew more slowly in December after a surge in November, as consumers put the brakes on purchases after major sales periods such as Black Friday.

According to new figures from the Australian Bureau of Statistics (ABS), household spending on retail rose 4.8 per cent year-on-year to $38.6 billion in December, easing from a 7 per cent uplift in November.

Growth was strongest in cafes, restaurants and takeaway food services, while more discretionary categories such as clothing, household goods and department stores recorded more modest gains.

By geography, Queensland and WA led annual growth at 6.3 per cent and 7.6 per cent respectively, while NSW and Victoria grew by just over 3 per cent. 

According to the Australian Retail Council (ARC), the softer number suggests that many households had already shopped for Christmas, taking advantage of Black Friday discounts. They have also spread spending across October and November rather than waiting till December. 

“For retailers, December has historically carried much of the heavy lifting for the year,” said ARC CEO Chris Rodwell. “When spending is pulled forward into earlier discount periods, it can place additional pressure on already thin margins.”

“Households are chasing discounts, shopping earlier and tightly managing what they spend. Cost-of-living pressures are still very much at the forefront of people’s minds. The recent interest rate rise will add to this uncertainty, further undercutting confidence for businesses and their customers,” he added.

‘BFCM more popular than ever’

Overall, household spending was down 0.4 per cent month-on-month in December, reversing a  1 per cent increase in November and a 1.4 per cent increase in October. However, spending volume still rose 0.9 per cent for the quarter. 

Shaun Broughton, MD of Apac and Japan at Shopify, said the figures presented a snapshot of consumer shopping habits, with promotional periods like Black Friday and Cyber Monday (BFCM) “more popular than ever” for value-driven holiday shopping.

“The figures underline just how critical BFCM is to retailers, especially as it evolves from a sales week to a sales month (and beyond), showcasing how a successful peak season often ensures you end the year on a high,” Broughton continued.

CreditorWatch’s chief economist Ivan Colhoun said the slowdown was expected, adding that “it will be interesting in time to see whether that phenomenon benefits larger retailers over smaller retailers”.

“A drop was always likely as payback for the very strong sales in October and November, as cultural events in October and Black Friday sales activity in November dragged forward some sales from the December period,” Colhoun added.

Slowdowns could become longer-lasting

Rodwell said the concern is that short-term slowdowns could become a longer-lasting trend.

“With interest rates rising again, mortgage costs increasing, and energy rebates ending, consumer spending remains fragile. 

“The cost of doing business continues to climb – from significant rent and wage increases to energy, insurance and supply chain costs, along with the intense cost of retail crime,” he said. 

Rodwell added that economic reforms that ease the cost of doing business are critical to prevent a broader slowdown in consumer spending.

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