It comes just one month after the RBA lifted rates by 0.35% – bringing the national cash rate to 0.85%. And more hikes could be on the cards for coming months.
The CEO of industry body National Retail Association described the RBA’s decision – likely to hit consumers in the pockets and weigh on retailers’ bottom lines – as “heavy-handed”.
The ASX 200 plunged 1.53% on Tuesday. Meanwhile, the S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) tumbled 2.34%.
ASX 200 retail shares slump following RBA decision
Retail-focused conglomerate Wesfarmers Ltd (ASX: WES)’s stock slumped 3.8%.
RBA governor Philip Lowe noted inflation in Australia is lower than in other advanced economies but higher than was previously expected.
Many factors making headwinds for ASX 200 retailers – COVID-19 and supply chain issues – also drove inflation this year.
But National Retail Association CEO Dominique Lamb is dubious that such a hike was necessary.
She called the RBA’s decision “heavy-handed”, saying the regulator moved too fast to increase interest rates.
“Many retailers are watching consumer confidence rapidly slipping [amid] a raft of increasing costs and external factors such as the cost of fuel, power … increasing wages, and supply chain issues,” Lamb told The Motley Fool Australia. She continued:
Interest rate rises in quick succession impacts the willingness of consumers to spend and invest in their homes and [they will] shrink their basket sizes.
At the end of the day, many retailers are hanging on and this could be the last straw.
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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Harvey Norman Holdings Ltd. and Super Retail Group Limited. The Motley Fool Australia has positions in and has recommended Harvey Norman Holdings Ltd., Super Retail Group Limited, and Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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