Household sector is starting to falter

There is growing evidence that the household sector in Australia is beginning to struggle as subdued income growth weighs on spending. The sharp slowdown in the growth of retail sales volumes in the first quarter is consistent with a notable easing in real consumption growth. And with retail sales values falling outright in March for the third time in four months, there clearly wasn’t much momentum going into the second quarter either. That tallies with the further decline in consumer confidence in May and supports our view that real consumption growth will slow from 2.7% last year to around 2.0% this year.