On January 30, Australian discretionary retailers achieved a record high for the third consecutive session as cooling inflation figures fueled expectations of an imminent interest rate cut, potentially boosting spending on non-essential goods.
The S&P ASX 200 Consumer Discretionary sub-index surged by up to 1.6% on Thursday, breaking records also set on Tuesday and Wednesday.
Analysts anticipate Australian discretionary retailers benefiting from interest rate cuts in 2025, allowing consumers to allocate more funds towards items like electronics and footwear.
Recent data indicated the lowest rise in consumer prices in nearly four years during the final quarter of 2024, while declining home prices contributed to easing core inflation. This development could pave the way for the Reserve Bank of Australia to decrease borrowing costs as early as February.
Australia's major banks, including Commonwealth Bank of Australia, National Australia Bank, Westpac, and ANZ, are all anticipating interest rate reductions kicking off next month.
Stella Ong, a market analyst at Superhero, remarked, Expectations of a February cut have boosted the local market, particularly affecting rate-sensitive stocks in the tech and consumer discretionary sectors.
Lower interest rates are likely to instill consumer confidence, potentially reviving spending after a two-year period where non-essential expenditures were curtailed due to cost-of-living concerns.
Equity analysts at Morgan Stanley expressed optimism for the consumer outlook in 2025, noting that tax and rate cuts are expected to alleviate financial pressures on households and support a return to normalized spending growth.
The Consumer Discretionary sub-index saw an uptick on Thursday driven by key players like Wesfarmers, the leading conglomerate in the country with businesses like Target and Kmart, which saw a 1% increase. Gaming company Aristocrat Leisure recorded a 3.5% rise.
Morgan Stanley also expressed positivity towards Kmart and Bunnings, the hardware chain under Wesfarmers.
Harvey Norman, an electronics retailer, and Guzman y Gomez, a quick-service restaurant chain, each saw a 1.5% gain on Thursday.