Consumers are finally reaching the spending cliff

This makes January and February 2023 the months to watch.

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Comment from a number of retailers suggested that the January sales event was quite strong.

But when the broad discounting wraps up this week, that’s when the retail test really begins.

The potential for a cliff sell has not been reflected in the share prices of many retail stocks. Since the beginning of January, Myer shares are up 43 percent, JB Hi-Fi is up 16 percent over the same period, and Solomon Lews Premier Investments shares are up 11 percent.

Myer recently reported a very strong sales-trading period over the six weeks leading up to Christmas, but that included Black Friday and Cyber ​​Monday in late November.

ABS data showed that the department store category was hardest hit in December, falling a seasonally adjusted 14.3 percent. Apparel, footwear and accessories had a tough December with sales falling 13 percent, while home goods sales fell 7.8 percent for the month.

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Grocery retail was the only category to gain – but only 0.3 percent, and cafes and restaurants were flat.

But how the fall in retail sales will affect the Reserve Bank’s rate hike deliberations next month remains to be seen.

Just a few weeks ago, the market was discounting a strong possibility of a 25 basis point rate hike in February in response to rebounding inflation in November and strong retail spending.

But after the retail sales figures were released on Tuesday, bond yields eased and the Australian dollar slipped back a bit as expectations of where peak interest rates will end up eased slightly.

Some comments emerged on Tuesday that the RBA might wait in February and give it time to digest more recent inflation and spending measures.

But the consensus is that there will be another rate hike next week, despite growing protests that some mortgage holders are finding it difficult to make repayments.

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