Australian Retail Trade Falls

Australian retail trade at current prices fell 0.3 per cent in May to an adjusted $ 17.834 billion from a downwardly revised $ 17.881 billion in April, according to the Australian Bureau of Statistics (ABS).

Economists had forecasted a rise of 0.3 per cent in the month, after a 1.4 per cent rise in April.

RBC Capital Markets senior economist, Su-Lin Ong, said the retail sales numbers had been weaker than expected but were not overly surprising, given the challenges to households during May.

"They follow a pretty strong April, even though that (figure) was revised down slightly, so a correction was always expected, it was just the degree of the correction," Ms Ong said.

"Higher petrol prices and the initial impact of higher mortgage rates from the Reserve Bank's May hike look to have weighed a bit on retail expenditure in the month.”

"I think we're pretty mindful that there are still some pretty supportive factors for consumption including a very healthy labour market as well as across the board income tax cuts which kicked in effectively yesterday."

According to the citigroup senior economist, Annette Beacher, today's result was a modest payback from the sharp April reading.

She also mentioned that April had several special factors such as the moving of school holidays to accommodate the Commonwealth Games in Melbourne.

"By and large taking the two months together there is still a solid pace," she said.

"It is hard to be pessimistic for the consumer sector given the labour market is so tight and wages growth is fairly firm.

"Today's weak number is not indicative of consumer spending falling off a cliff."

TD Securities chief economist, Stephen Koukoulas said, "We did have a big increase in the prime up."

"The month of May was the month where we saw the rate hike delivered from the Reserve Bank, petrol prices were at their high, so there were a lot of negative news to throw at the consumer in that month.

"Just the statistical volatility of the monthly series suggests there's no big deal in that slight fall and the trend is still quite strong."

Department store turnover also declined by 1.9 per cent, while clothing and soft goods and other retailing decreased by 1.4 per cent.

Food retailing was flat, recreational good retailing was down 0.7 per cent and hospitality and services slipped 0.2 per cent.

The only increase was in household good retailing, which grew by 1.1 per cent.