Inflation continues to driver higher in 2022.
The post Take a seat: What inflation data might mean for ASX retail shares appeared first on The Motley Fool Australia. –
Both headline and core inflation continue to push higher in Q1 FY23, the latest economic data shows.
Over the 12 months to June 30, the consumer price index (CPI) rose 6.1%, according to data released today by the Australian Bureau of Statistics (ABS).
That’s a full 100 basis points up from 5.1% year on year in the previous quarter.
The most significant price increases last quarter were new home purchases by owner-occupiers, automotive fuel, and furniture, the data shows.
However, year on year, the highest price increases are in transport (up 13%) and housing (up 9%), with food costs also 6% higher over the year.
Australia’s inflation rate is now at its highest mark in more than 20 years and, before that, its highest level since 1997, as seen below.
What does this mean for ASX retail shares?
As inflation continues to erode company margins downstream, the ability to pass through costs on to the end consumer is paramount.
Hence, companies with this ability will shine due to their earnings and margin resilience.
Further, with price increases in areas such as retail and furniture, there’s also the prospect of higher earnings for companies exposed to these industries.
As such, it’s unsurprising to see analysts at Macquarie rate Nick Scali Limited (ASX: NCK) highly on the radar. The furniture company recently acquired the Plush-Think Sofa business.
The broker rates Nick Scali a buy and values the company at $12.70 per share. It currently trades at $9.18 apiece after its share price gained 10% this past month.
Meanwhile, retail players are getting rewarded on the back of the inflation data as well.
The Temple & Webster Group Ltd (ASX: TPW) share price is currently 5.4% higher at $3.71. Investors are bidding the share up on a volume more than 50% of its four-week trading average.
Both of these shares have been heavily punished in 2022 so far with Temple & Webster, in particular, incurring a 70% loss over the last 12 months.
But it will take sustained gains for both to recover to their previous highs, as shown on the chart below.
The post Take a seat: What inflation data might mean for ASX retail shares appeared first on The Motley Fool Australia.
Wondering where you should invest $1,000 right now?
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.* Scott just revealed what he believes could be the “five best ASX stocks” for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now
See The 5 Stocks
*Returns as of July 7 2022
setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()
More reading
Why I think these 2 ASX growth shares could keep marching upwards
3 ASX All Ordinaries shares going great guns on Thursday
Why is the Temple and Webster share price up 7% today?
Temple & Webster share price jumps 11% after hitting recent lows
Does the FY23 outlook make ASX retail shares look like bargains?
Motley Fool contributor Zach Bristow 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 Temple & Webster Group Ltd. The Motley Fool Australia has recommended Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.