Annual retail spending continues to outperform market expectations, but a two-speed retail economy is emerging, with some sectors going backwards after accounting for inflation.
Australian Retail Council analysis of Australian Bureau of Statistics Household Spending Indicator data shows spending on retail reached $40.04 billion in August, up 6.0 per cent compared with the same month last year.
This growth rate in August is unchanged since the July result. However, the August monthly data show that households are clearly allocating more of their budget toward transport spending, with an 8.1 per cent increase in fuel spending month-on-month. Excluding fuel, household spending would have fallen 0.3 per cent compared with July. Discretionary household spending fell in August, with declines across clothing and footwear, recreational goods, food and furniture.
Australian Retail Council Chief Economist Glenn Fahey said while the overall annual result was broadly in line with historical rates of nominal growth, there is clear divergence across the retail industry.
“Cafes, restaurants and takeaway food services continued to perform strongly, while some traditional discretionary categories were much softer.
“Department stores and large online retailers recorded annual growth of just 0.8 per cent. Against inflation running around 4 per cent, which means that spending in that part of the sector going backwards in real terms.”
Importantly, Fahey warns that nominal household spending data should be viewed in context of the elevated level of inflation in the economy, especially in terms of the challenges for retailers in managing higher fuel costs flowing through freight and supply chains.
“The climate of higher costs means the strained margins are likely to remain a defining feature as businesses move towards Black Friday and Christmas.”
Mr Fahey said the resilience shown by the retail sector in 2026 to date could come under further pressure after the RBA lifted the cash rate by 25 basis points yesterday.
“November and December are typically make-or-break periods for a lot of retailers, and the key question now is whether households can maintain that level of spending as higher borrowing costs begin to bite.”
Retail spending by industry group — August 2026 compared with August 2025:
Spending growth was strongest in the Northern Territory (+9.4%) and Western Australia (+8.2%), while the Australian Capital Territory (+3.9%) and Victoria (+4.6%) recorded more moderate growth.
Retail spending by state and territory — August 2026 compared with August 2025:
About us: Australian Retail Council (ARC) represents a $444 billion sector that employs 1.4 million Australians across metropolitan, regional, and remote communities – making retail the largest private sector employer in the country and a significant contributor to the Australian economy. Our membership spans the full spectrum of Australian retail, from family-owned small and independent retailers that make up 95% of our membership, through to our largest national and international retailers that employ thousands of Australians and support both metropolitan and regional communities every day.
