After a strong year, yesterday's retail trade figures showed turnover falling by 0.5% s.a. in May, perhaps to some extent impacted by the budget and a hit to consumer confidence.
Increasing household consumption, as has been the case in many developed countries, has been a key driver of economic growth for Australia over the long run (click chart):
And low interest rates have seen retail trade surge over the past year. But as noted, yesterday's data showed a 0.5% m/m seasonally adjusted decline. Although there is still the June data to come, it therefore looks quite likely that weakening retail and household consumption will subtract from GDP growth in Q2 (click chart).
Indeed, New South Wales has been a very strong long-term performer in retail trade.
The one sector which continues to demonstrate extraordinary growth across Australia is retail trade turnover for cafés, restaurants and takeaways.
Ultimately, spending patterns have been and are shifting, as I looked at in a little more detail here. All of which means that for those who want to get ahead in investment and their personal finances, it's important to buck the trend towards increasing discretionary expenditure in line with income growth.
-New South Wales economy continues to look in very good nick;
-the economy may struggle to record much (any?) growth in Q2;
-interest rates likely to be on hold for a long time to come.