Food spending was mixed:turnover in cafes,restaurants and takeaway shops fell 0.3 per cent,while food retailing rose 0.1 per cent.
“Over the last 12 months,growth in food-related spending has mostly been driven by rising food prices,” Dorber said.
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He noted this week’s consumer price data,which showed that inflation for food and non-alcoholic beverages rose by 1.6 per cent over the three months to the end of June.
“Consumers are responding to these price rises by changing to cheaper brands or by simply buying less,” he said,adding it would be important to look at next week’s retail sales volume data to see the full impact of inflation on sales.
Supermarket executives this weektold a House of Representatives economics committee inquiry that cost-of-living pressures were changing consumers’ shopping patterns,forcing them to shop around for food staples such as bread,cheese and eggs in the hope of finding a bargain.
Pickering said that,on average,households were consuming fewer retail products than they were late last year as prices continued to climb.
“Over the June quarter,retail spending was 0.4 per cent higher than during the March quarter. Given prices have continued to rise,we expect that the volume of retail has now declined for three consecutive quarters. That hasn’t happened in 15 years.”
ANZ economist Madeline Dunk and ANZ head of Australian economics Adam Boyton said the fall in sales supported the case for the Reserve Bank to keep interest rates on hold.
“When considered alongside our soft ANZ-observed spending data,today’s 0.8 per cent[month on month] fall in retail sales paints a stark picture about how households are dealing with the current economic environment,” they said.
“Spending is slowing as household budgets are squeezed by rising mortgage payments and cost-of-living pressures.”
But Commonwealth Bank economists still expect the RBA to lift interest rates by a quarter of a percentage point on Tuesday,pointing to the tight labour market and lack of wages data since the Fair Work decision to raise minimum wages,but acknowledged it was a line-ball call.
CBA senior economist Belinda Allen said home prices were still rising,productivity was weak and the Australian cash rate remained significantly below that of other central banks.
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“Overall,there is enough evidence to suggest the path of least regret for the RBA is to lift the cash rate by[0.25 percentage points] to 4.35 per cent in August,” she said.
“This should provide an offset to any lingering risks in the inflation and wages outlook.”
Westpac also believes a further rate rise is needed on August 1,while financial markets expect there is just a 10 per cent chance of an increase.