Australia's Retail Sales Contract Sharply in June: Recession Looming?

Australia’s Retail Sales Contract Sharply in June: Recession Looming?

Posted Friday, August 27, 2021 by
Aiswarya Gopan • 2 min read

Retail sales across Australia showed a steep decline amid the latest round of lockdowns and restrictions imposed by the government in an attempt to contain the spread of the highly contagious delta variant. According to the ABS, retail sales contracted by 2.7% MoM in July, coming in below economists’ forecast which was for a 2.3% drop and the weakest reading seen so far this year.

July’s retail sales suffered on the back of freshly imposed travel restrictions, which accounted for 1.8% of the drop. The retail sector contributes around 18% of Australia’s GDP, which means that the poor performance could have a significant impact on the economy.

Analysts have already revised their estimates for Australia’s GDP lower after the implementation of the latest round of lockdowns. However, some are forecasting a possible recession, in case the economy sees a contraction during Q3 which could even extend into the next quarter, especially with the rollout of the COVID-19 vaccine progressing at a far slower pace than in the US and Europe.

The Australian government has set a target of vaccinating at least 70% of the adult population before easing restrictions and ending lockdowns once the figure rises to 80%. Meanwhile, the RBA remains confident that domestic consumption could surge as soon as economic activity picks up again, staying on course to reduce its bond purchase program despite the latest restrictions.

Impact on the AUD

The Australian dollar took a dive against the US dollar earlier in the day and is continuing to trade weak under the $0.73 level. However, some of the bearish moves in the AUD/USD currency pair could be attributed to a firm USD ahead of Fed’s Jackson Hole symposium scheduled for later in the day.


At the time of writing, AUD/USD is trading at around. However, the commodity currency could remain under pressure unless the economic outlook for Australia improves in the coming weeks.

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