Bargain hunters held back pre-Black Friday

Retail turnover fell virtually across the board in October, including cutbacks in purchases of clothes and household goods and a drop in spending at departments stores and at cafes, restaurants and on take-away meals, Australian Bureau of Statistics figures show.

The one category where outlays increased was in food, where turnover grew by 0.5 per cent.

Overall, retail sales dropped 0.2 per cent, dragging annual sales growth down to 1.2 per cent - the weakest spending growth in almost 13 years, outside the pandemic.

Taking into account inflation and population growth, spending was even softer.

The monthly consumer price index was growing at an annual rate of 5.6 per cent in September, and figures due out on Wednesday are tipped to show inflation still exceeded 5 per cent in October.

The ABS said the looming Black Friday and Cyber Monday sales appeared to have encouraged many to hold back on their spending in October in order to take advantage of heavy discounting the following month.

"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," ABS head of retail statistics Ben Dorber said.

"This is a pattern we have seen develop in recent years as Black Friday sales grow in popularity."

Supporting Mr Dorber's analysis, the ANZ-Roy Morgan consumer sentiment index indicates that heavy discounting during the Black Friday sales period made otherwise cautious shoppers more open to buy a major household item despite subdued sentiment overall.

The index rose 2 points last week, partially recovering from the blow to confidence caused by the November 8 interest rate hike. But the It the mood of consumers remains downbeat at 76.7 points - well below the long-term average of almost 111 points.

In evidence that more was at play in October's spending slowdown than just anticipation of the Black Friday sales, it contracted even though the nation's population is expanding at its fastest pace in about 15 years .

Commonwealth Bank economist Stephen Wu said this meant that retail purchases per person were "undoubtedly weak".

Mr Wu said the only areas of expenditure keeping up with population growth were food and eating out.

KPMG chief economist Brendan Rynne warned retailers faced a "subdued" Christmas and most of 2024 was unlikely to be any different.

Dr Rynne predicted spending in shops would not start to pick up until the last quarter of 2024 when continued strong population growth, "slowing" interest rates and the wealth effect of higher property prices encouraged households to lift their consumption.

Economists expect future data to show a repeat of last year when a surge in spending around the Black Friday sales period was followed by weak turnover in December - evidence that sales brought forward spending rather than increased the overall amount people were prepared to spend.

In 2022, retail turnover jumped by 1.5 per cent in November before contracting by 4.2 per cent in December

Mr Wu said spending data gathered by Commonwealth Bank up to midnight last Friday showed that spending patterns were "broadly similar to previous years".

Dr Rynne said the latest retail data increased the chances that the Reserve Bank of Australia board will keep interest rates on hold when it meets on December 5, despite evidence of solid wages growth.

Reserve Bank governor Michele Bullock has warned of the need for increased productivity if current wages growth is to be sustained without adding to inflation.