S&P/ASX 200 Index (ASX: XJO) retail shares suffered alongside the broader market this afternoon amid the Reserve Bank of Australia's decision to hike interest rates by 0.5%.
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%.
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ASX 200 retail shares slump following RBA decision
As of Tuesday's close, the share prices of ASX 200 retail giants JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN) were down 3.4% and 1.1% respectively.
Retail-focused conglomerate Wesfarmers Ltd (ASX: WES)'s stock slumped 3.8%.
Finally, ASX 200 retail shares City Chic Collective Ltd (ASX: CCX) and Super Retail Group Ltd (ASX: SUL) are also feeling the brunt. They fell 3.2% and 2.1% respectively.
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.
