CHART: Retail sales are slowing as the effect of an interest rate cut fades

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Growth in the retail sector is expected to slow further this year as the euphoria of an interest rate cut fades, according to the Australian Food and Grocery Council CHEP Retail Index.

The index, designed as a leading indicator of retail activity, is showing 4% year-on-year growth in the March quarter, slowing to 3% by the June quarter.

Retail trade turnover for the month of March is predicted to be $24 billion, representing a year-on-year growth of 4.2%.

This is slightly higher than expected growth for the month was likely due to the Reserve Bank’s February interest rate cut and earlier falls in petrol prices.

However, the downward trend remains with turnover expected to soften to $23.9 billion in May and year-on-year growth to slow to 3.1%.

Geoffrey Annison, Australian Food and Grocery Council deputy chief executive, said a stronger labour market will be needed for strength in retail sales growth to be sustained.

The AFGC CHEP Retail Index is a project between the Australian Food and Grocery Council and CHEP Australia, the leading provider of pallets and containers, and powered by Deloitte. The Index uses CHEP transactional data based on pallet movements and is a lead indicator of ABS Retail Trade data.

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