This morning has showed the BRC-KPMG Retail Sales Monitor ease from 2.8% to 2.6%, though exceeding expectations of 2.4%. This comes as retail spending eases as the impact of monetary tightening sets in and consumers save ahead of Christmas. Here, the Chief Executive of the British Retail Consortium, Helen Dickinson stated that “many households are also delaying their Christmas spending in the hopes they can grab a bargain in the upcoming Black Friday sales.” As many consumers adjust their spending, Dickinson went further to cite the so-called “lipstick effect” which has driven spending on “lower-price indulgences, such as beauty products” away from higher value items.
High mortgage costs and waning consumer confidence were also cited as reasons for the slowdown in spending. Today’s print marks the second lowest this year and marks a considerable slowdown from Augusts’ print of 4.3%.
Away from the BRC’s data, Barclays October Consumer Spending survey also suggested that households were cutting down on non-essential items and discretionary spending including eating out.
This morning has seen the RBA raise their cash rate by 25bps to 4.35%, meeting expectations and marking the first hike since four consecutive rate pauses. This has also brought the benchmark interest rate to its highest level since 2011. While the latest inflation data from Australia indicates that headline CPI eased from 6% to 5.4%, it nonetheless remains well above the Bank’s target range of 2-3% and came 10bps above expectations.
The hotter-than-expected inflation data is indicative of the headwinds continuing to face the RBA with Governor Michele Bullock stating that though inflation has “passed its peak but is still too high and is proving more persistent than expected a few months ago”. The statement continued by stating that “since its August meeting, the Board has received updated information on inflation, the labour market, economic activity and the revised set of forecasts. The weight of this information suggests that the risk of inflation remaining higher for longer has increased. While the economy is experiencing a period of below-trend growth, it has been stronger than expected over the first half of the year.” On the topic of growth, the Australian economy grew 0.4% on a quarterly basis over Q2, beating expectations of 0.3%. This marked the seventh consecutive quarter of growth with public investment and government spending supporting much of the expansion.
Hence, it’s evident that the RBA see that stronger-than-expected growth give them some room to raise rates particularly given the context of inflation. In similarity with most other central banks, the statement indicated that the question of further hikes “will depend upon the data and the evolving assessment of risks”.
The New York based coworking and office space company WeWork has filed for bankruptcy listing $19bn worth of debt. The company, which has 777 locations across 30 countries, was founded in 2010 ran into difficulty following failed initial public offering in 2019 which was exacerbated the subsequent pandemic which saw offices empty throughout the globe. It subsequently went public in 2021 through a special purpose acquisition company merger where earlier that year the company was valued at around $9bn, marking a considerable drop from SoftBank Group’s $47bn valuation in 2019. The latest figures indicated that its occupancy rate was between 10 and 15 percentage points below forecasts, at around 72% and in the first half of the year lost around $1bn as operating costs surged.
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