A pessimistic view on the outlook of household spending saw sentiment in the retail sector plunge.

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“Confidence in the retail sector took a significant hit, falling more than 20 points to be well into negative territory, reflecting concerns about the outlook for household spending,” NAB chief economist Alan Oster told AAP.

That’s despite the Australian Bureau of Statistics reporting a near 8 per cent rise in household spending in the year to May. Aussies spent 14.5 per cent more on transport, 12.6 per cent more on general goods and services and 10.3 per cent more on cafes, restaurants and hotels.

In a monetary policy update NAB said it expected the cash rate to hit 2.35 per cent by the end of the year and 2.6 per cent in early 2023.

“The rapid increase in rates and higher prices faced by households will begin to moderate consumer demand and we now see below-trend GDP growth of 1.8 per cent in 2023 and 2024,” the bank reported.

“We see inflation peaking in both headline and trimmed-mean terms in Q4 at 7.2 per cent and 5.4 per cent, respectively. Inflation is then expected to ease in 2023 as growth slows globally and the impact of supply shocks begin to wane.”

Consumer confidence ratings reported by ANZ-Roy Morgan dropped 2.1 points to 81.6 this week, down almost 30 points compared to this time last year.

Wall Street is anticipating a consumer price report on Wednesday (US time) and domestic investors are eyeing the release of the next Consumer Price Index (CPI) figures from the ABS on July 27.

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~ with AAP

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