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Economic Update – January 2022 Retail Sales

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Retail Sales have some way to go before helping to deliver a sustainable economic recovery

As the economic environment, post Omicron, stalled recovery momentum continues, the situation has become yet more volatile.

The latest update from the Australian Bureau of Statistics (ABS) for Retail Sales (January 2022) reinforces this point.

Retail sales increased by 1.8 per cent in January to be 1.1 per cent higher than in the same month last year. This is a great result given the hefty 4.4 per cent monthly decline retailers experienced in December 2021 as they were ambushed by the adverse impacts of the Omicron variant of COVID.

It is a very promising update today, providing a strong base for the challenges many Small and Medium-sized Enterprises (SMEs) face in early 2022 in the new COVID world. This result should provide a strong foundation for a sustained improvement in business confidence and subsequent activity. Ahead of a meeting of the Reserve Bank Board of Australia (RBA) tomorrow, todays retail sales outcome will not go unnoticed.

Much has happened since January, though, and we just don’t know how the board game will play out. Food Retailing fared well in January, growing sales by 2.2 per cent, but CreditorWatch information suggests that this sector may struggle in the short term. The CreditorWatch Business Risk Index for January revealed some challenges to the Food and Beverage sector and the sectoral retail sales result for this same month reveals a contraction of 0.8 per cent.

We have entered an environment in 2022 where we want to eat up the good bits and today’s aggregate retail. sales result is part of that. We want to be optimistic and there is justification for that. Look below the surface and the is some genuine cause for pessimism as well.

Welcome to the vagaries of 2022.

Harley Dale

CreditorWatch Chief Economist