A number of S&P/ASX 200 Index (ASX: XJO) consumer shares have seen plenty of volatility this year.
Certainly, the share prices of many ASX retailers have dropped during 2022.
For instance, in the ASX 200, the Wesfarmers Ltd (ASX: WES) share price has fallen 28% this year so far while the Harvey Norman Holdings Limited (ASX: HVN) share price has fallen 19%. Over the same period, the JB Hi-Fi Limited (ASX: JBH) share price has declined 21%, Coles Group Ltd (ASX: COL) has dropped 7% — and is down 14% since 22 August — and the Woolworths Group Ltd (ASX: WOW) share price is down 10%. The list of woe goes on.
So, with all of that pain, you'd think retail sales are plummeting. Not so.
Retail sales grow in August
The Australian Bureau of Statistics (ABS) has reported that seasonally adjusted retail sales for August 2022 rose by 0.6% month over month and were up 19.2% compared to August 2021.
Interestingly, there was quite a mixture of performance when it came to different retail segments.
Month over month, food retail sales increased 1.1%; household goods retailing rose 2.6%; clothing, footwear, and personal accessory sales fell 2.3%, department stores rose 2.8%; 'other retailing' decreased 2.5%; while cafes, restaurants, and takeaway food services saw a 1.3% rise.
Bloomberg reporting suggests this is going to mean another 0.5% increase in interest rates by the Reserve Bank of Australia (RBA):
The resilience in consumer spending is likely to bolster expectations the Reserve Bank will raise rates by a half-percentage-point for a fifth straight month on Tuesday to take the cash rate to 2.85%. The RBA has signaled further hikes ahead, prompting money markets to price in a rate of about 3.4% by year's end.
The RBA maintains that households are in a solid position to weather higher borrowing costs, having used pandemic-era stimulus to build up their savings or make early repayments on their mortgages.
In addition, unemployment of just 3.5% means most Australians have an income to meet their obligations.
While the month-over-month increase indicates that the RBA has more work to do, I think that the year-over-year increase is a positive sign that ASX 200 retail shares can report growth for the first half of FY23. That's because we are currently cyclical against lockdowns for NSW and Victoria in the first half of FY22.
Are higher interest rates having no effect?
While retail sales are still increasing, there may be signs that the RBA's efforts could be starting to work.
According to reporting by The Australian, Moody's thought that monthly retail sales were going to grow by 1.5% in August. It pointed out that food-related industries were important drivers of the monthly numbers, but some of the increase may have been due to food inflation "giving retail value figures an artificial boost".
But, there is still evidence of strong consumer spending growth, with retail sales in department stores and household goods both growing at least 2.6%.
So, Australia's retail figures continue to grow. This is positive for ASX 200 retail share revenue as a whole, but it also gives the RBA more impetus to keep raising interest rates to slow the economy.
