Retail sales discounts cutting away at inflation

Consumers held off on spending in October to take advantage of November discounts.

Heavy discounting in the holiday sales period is expected to have contributed to a slowdown in inflation.

Economists are set to pore over the consumer price index for November when it is released by the Australian Bureau of Statistics on Wednesday, with the first inflation release for 2024 kicking off a decisive month of data for interest rates.

Black Friday and Cyber Monday sales events are tipped to have resulted in outright price declines for goods such as garments, household products, and audio, visual and computing equipment, CBA economist Stephen Wu said.

Consumers held off on spending in October to take advantage of the discounts amid rising cost-of-living pressures, with retail sales turnover rising two per cent in November, following a 0.4 per cent drop the month before.

Fuel prices also decreased in November, while continued growth in rent prices and elevated services inflation are expected to offset the slowdown.

“Wednesday’s release will include an update on market services price inflation that was not available in October,” Mr Wu said.

“This will confirm the degree to which inflation remains a ‘homegrown and demand-driven’ issue, to use RBA Governor Michele Bullock’s words back in November.”

Mr Wu expects the ABS data to show a 4.4 per cent rise in prices for the year to November, a touch softer than consensus estimates of 4.5 per cent, after inflation came in at 4.9 per cent the previous month.

Any decrease would bring monthly inflation back to its lowest level since January 2022.

IG markets analyst Tony Sycamore says core inflation, which excludes food and energy prices, dropping below five per cent would confirm the rates market, which has priced in two Reserve Bank rate cuts in 2024, is on the right track.

Core inflation – also known as the trimmed mean – climbed at 5.3 per cent in October.

While Wednesday’s inflation figures will set the scene for 2024, they are likely to be overshadowed by the December quarter CPI release on January 31.

It remains the benchmark measure of consumer prices in the country, Mr Wu said, and will have a greater bearing on the RBA’s first cash rate decision of the year in February.