Usually consumer sentiment and retail spending go hand in hand, but not according to the latest Deloitte Access Economics retail forecast, which says consumer sentiment has gone downwards, while retail spending is actually showing growth.
Deloitte Access Economics partner David Rumbens said the lift in growth was due to a rebound in full-time jobs growth and continued wealth gains from housing, but consumers are not happy at all.
“Despite improvements in unemployment expectations and an increase in business confidence, consumer sentiment is at a low point with concerns over financial risks,” he said. “And in the face of oncoming competition from the likes of Amazon, widespread aggressive discounting to lure in the consumer dollar, and rising energy prices, it is likely retailers aren’t so happy either.
“Nominal retail spending growth for the year to June 2017 was 3.6 per cent and we expect it to remain steady at that rate over the year to June 2018. However, more of the growth next year may come from volume growth, with prices increasingly under pressure. Retail volume growth for the year to June 2017 was 2.5 per cent, rising to 3.4 per cent for the year to June 2018.”
Real retail turnover over the June quarter was 1.5 per cent, which is the highest real growth result since the March quarter in 2013, and follows a subdued start to 2017 for retail spending growth.
“This signals an improved spending outlook after three months of negative turnover growth in the last year,” said Rumbens.
Household goods are back on top, outpacing all other non-food retail categories in the year to June 2017, with 5.8 per cent real turnover growth. On the other side of the spectrum, real turnover growth for department stores remains weak over the past year at 1.3 per cent.
Retailers selling more for less
The entry of Amazon and other international ecommerce players into the Australian market is expected to put increasing downward pressure on prices over the coming years.
Intense competition is already evident, according to Deloitte, which puts retail price growth at a minimal 1.0 per cent over the year to June 2017.
Another pain point for retailers is the high price of energy, which Rumbens said is putting pressure on retail margins.
“The average price of electricity in Australia grew by 116.4 per cent over the 10 years to June 2017, and 7.8 per cent over the last year alone. This adds further pressure to retailer margins, as intense competition keeps prices down.”
However there is a bright spot for retailers—retail wage growth is growing even slower than the record low average wage growth across the economy.
A version of this story originally appeared on Giftguide.
Want the latest retail news delivered straight to your inbox? Click here to sign up to the weekly retailbiz newsletter.