Australians are buying significantly fewer goods at shops and department stores, new Australian Bureau of Statistics (ABS) data show.
Retail sales volumes fell 0.6 per cent in the March quarter of 2023, according to the ABS.
The fall in the March quarter followed a 0.3 per cent fall in the December quarter of 2022.
ABS head of retail statistics Ben Dorber said retail sales volumes fell for the second straight quarter as mounting cost-of-living pressures continued to weigh on household spending.
"Outside of the COVID-19 pandemic period, this is the largest fall in retail sales volumes since the September quarter 2009," Mr Dorber said.
Earlier this year, Deloitte Access Economics warned of an impending "consumer recession" as mortgage repayments rose, rental prices increased and other costs of living continued to soar.
But on Tuesday, the National Australia Bank said the consumer recession had arrived.
"It is here," NAB's chief economist told The Drum.
A technical economic recession requires two consecutive negative quarters of gross domestic product (GDP) growth.
And gross domestic product consists of consumer spending, business investment, government expenditure and the difference between what we receive for our exports versus what we import.
A consumer recession is considered to be a contraction in the consumer spending element of this equation.
It is a significant element too, with growth in consumer spending making up the vast bulk of economic growth.
"Aussie shoppers are adjusting their spending in line with smaller wallets," CBA Economics noted.
"This adjustment will continue through to end year as more fixed-rate home loan borrowers lock in new mortgage payments at a higher level.
"Household goods retailers are right to be apprehensive about the next 3-6 months — profit margins will come in for further downward pressure.
"Retail strategies employed will come under scrutiny," the bank said.
The drop in purchases was most pronounced in the household goods space.
Retail sales volumes for household goods retailing fell 3.7 per cent, the fifth consecutive fall, according to the ABS.
Consumers continue to spend less on large discretionary purchases in this industry, which peaked in the December quarter of 2021 with higher demand during COVID-19.
"Other retailing" sales volumes fell 0.8 per cent.
Elsewhere, sales volumes rose.
Sales volumes increased for department stores (1.5 per cent), and clothing, footwear and personal accessory retailing (0.2 per cent) where promotional activity and heavy discounts throughout the quarter boosted sales volumes.
Some economists caution that retail sales only make up roughly a third of the overall consumer spending component of overall economic growth, so any deterioration in them should be taken with a grain of salt.
Indeed, Deutsche Bank chief economist Phil O'Donaghue notes that while "households are spending less on 'things' [they are] increasing spending on services".
AMP supports this view.
However, the NAB says its internal data shows "transaction data has gone backwards by around 0.4 per cent for the second straight month in a row in April", which includes spending on services.
And ANZ-observed spending to May 6 shows that dining/takeaway and other services are showing signs of weakness in the three months to June.
"This suggests a wider pullback in spending, including on services, will limit household consumption growth (despite strong population growth) in the coming quarters," the bank noted.
