Australian retailers had an underwhelming month for sales in October as shoppers hung back to pounce on Black Friday sales.
The 0.2 per cent fall in retail trade as measured by the Australian Bureau of Statistics came in softer than the 0.1 per cent rise that was anticipated.
ABS head of retail statistics Ben Dorber said the fall in October followed a fleeting boost in spending in September, with retail trade lifting a robust 0.9 per cent that month.
"Turnover was down in all retail categories except food retailing," Mr Dorber said
"It looks like consumers hit the pause button on some discretionary spending in October, likely waiting to take advantage of discounts during Black Friday sales events in November."
He said this was a developing pattern as the sales grew in popularity.
Annually, retail turnover was 1.2 per cent higher than 12 months earlier, the softest result since August 2021.
ANZ economists Madeline Dunk and Adelaide Timbrell said there was now clear weakness in the retail sector, with sales falling even as prices keep rising and the population keeps growing.
The pair expect a "sugar hit" in November as shoppers take advantage of discounted goods, but the underlying trend is likely to remain subdued in coming months.
Consumption habits remain a focus for the Reserve Bank as it seeks to get inflation under control by lifting interest rates.
"The clear weakness in the retail sector highlights the ongoing squeeze on household budgets and supports the case for the RBA to keep the cash rate on hold at its December meeting in November," Ms Dunk and Ms Timbrell said.
Oxford Economics Australia head of macroeconomic forecasting Sean Langcake agreed the consumer sector was losing momentum but said it had "little bearing on the RBA's current struggle to rein in core inflation".
The group's economists still anticipate further tightening in coming months.
RBA governor Michele Bullock walked through the nation's inflation challenge while speaking alongside some of her international counterparts during a panel discussion on Tuesday.
Ms Bullock has been focused lately on the role of domestic demand, which she says is contributing to price pressures alongside supply shocks.
She said there were a "few things going on", including growing unit labour costs.
"Wages haven't got completely out of control in Australia, they're running at about four per cent, but without any productivity growth, that's actually resulting in a reasonable increase in unit labour costs in Australia," she said.
The central bank governor said spending was slowing, more so for younger people.
She said that was mainly a product of higher rents, which were rising quickly because of a shift in preferences towards smaller household sizes and lacklustre new home building.
"So that's impacting particularly younger people and lower income people," she said.
While these groups were pulling back, there was enough discretionary spending taking place to allow businesses to maintain their margins.
Australian Associated Press