Chart of the month - February 2025

Over the last 16 months and particularly in the last 6 months, online sales have outpaced total retail sales (see chart below). The RBA expected consumer spending to start increasing from the December quarter, it looks like much of the increase is going to online sales over traditional retail.

The pandemic was a game-changer

Like consumers in many other countries, Australian consumers greatly increased online purchases during the pandemic and continued the pattern post-pandemic (see chart below).

The initial jump in April 2020 coincided with the initial lockdown measures. The next big jump from July to September 2021 coincided with lockdown measures in response to the rise of the COVID-19 delta variant from June 2021.

After these two big step ups, online sales have continued to grow from these new levels. It is clear that the pandemic accelerated the trend of online purchases in Australia and has caused a structural change.

This growth in online purchases can also be seen in the rise of prominence of Black Friday, Cyber Monday, ClickFrenzy, and a growing online share during traditional sales periods such as Christmas, Boxing Day and End of Financial Year (June 30).    

As we can all remember from our personal experiences, most of the increase in online purchases during the pandemic was not driven by groceries but by stimulus payments and idle fingers on the keyboard! While people could not use their stimulus payments on services during the lockdowns, they could buy goods online (see chart below).

Recent growth

Monthly consumer spending and retail spending started to pick up in May 2024 but then spending fell to September while retail spending see-sawed. However, from October both measures have increased strongly (see chart below).

The spending data shows that spending on goods has accelerated over the last three months and surpassed the growth in spending on services in December (see chart below). Meanwhile the retail data shows that retail growth has been in online purchases over traditional retail (see the chart at the top of the article).

Final thoughts

The RBA expected consumer spending to increase late in 2024 and to extend into 2025. At this stage, it seems to be powered by online purchases in goods. Consumers have increased their online spending during the usual online and pre-Christmas sales periods.

The fact that the increased spending is expected by the RBA means that it is not a concern with respect to inflation. However, the emerging bias towards goods over services does raise some hope that sticky services inflation (which is still much higher than goods inflation) will continue to come down.