The escalating operating costs and systemic economic pressures faced by Australia’s retail industry have been reflected in the latest figures released by the Australian Bureau of Statistics.
National retail spending saw 2.15 per cent growth year-on-year in March, while monthly retail turnover fell 0.1 per cent in March, seasonally adjusted, following a fall of 0.2 per cent in February.
Seasonally adjusted, retail spending was $25.63 billion in March compared to the $25.69 billion in February. Economists had expected a 0.3 per cent rise.
The Australian Retailers Association said March’s modest figures reflected the government’s need to deliver on economic growth in last night’s Federal Budget.
According to Russell Zimmerman, ARA executive director, in lieu of February’s lacklustre trade figures, “the generally weak trade figures across the board appear to be caused by myriad of factors including low consumer confidence, political uncertainty, international competition and the effects of housing affordability on hip-pockets.”
He said the broader economic issues, combined with a number of challenges within the retail operating environment, are serving to stagnate rather than stimulate growth in the sector.
The prolonged warm weather during March also had an effect on specific retail categories, according to ARA, with the Clothing Retailing category experiencing a negative growth of -1.62 per cent year-on-year as shoppers restrained from filling their wardrobes for the cooler months ahead.
Cafes, Restaurants and Takeaway Food Retailing (4.81 per cent) also showed a decline in year-on-year trade growth, an outcome of reduced consumer confidence resulting in a hesitation to spend on non-essential items or experiences.
“Retail trade growth has now been negative in three out of the last four months (no growth per month on average), the sector’s worst performance since July to November 2012,” Citi Group analysts warned in a note.
“Retail sales numbers are now just 2.1 per cent higher than the same level of last year.
“This is the slowest growth rate in almost four years.”
The Citi note was subheaded “Alert: the retail sector is verging on recession.”
AMP Capital Dr Shane Oliver told AAP the figures show consumers are reining in spending amid low wage growth.
“It does indicate a pretty cautious Australian consumer,” he said.
“The figures are consistent with the weakness we have seen in wages growth and the wearing off from the boost in interest rate cuts.”
While the Reserve Bank of Australia has kept the official cash rate steady at 1.50 per cent since August, the banks have lifted interest rates in recent months to offset rising borrowing costs.
Dr Oliver said the retail figures followed soft March quarter international trade figures, which does not bode well for the nation’s economic growth.
“It all paints a soft picture for March quarter GDP (gross domestic product) growth,” he said.
“We will need to see decent growth in business investment, public spending and housing construction to see the quarter hold up.”
The trend estimate for Australian retail turnover was relatively unchanged (0.0 per cent) in March 2017 following a 0.1 per cent rise in February 2017. Compared to March 2016, the trend estimate rose 2.5 per cent.
Online retail turnover contributed 3.7 per cent to total retail turnover in original terms.
In regard to state-based figures, New South Wales (3.07 per cent), Victoria (2.84 per cent), Australian Capital Territory (3.09 per cent) and South Australia (3.33 per cent) showed relatively stable, albeit modest, year-on-year growth.
On the other hand, there is an apparent slowdown in year-on-year retail growth across Queensland (0.86 per cent), Western Australia (0.20 per cent), Tasmania (1.71 per cent) and Northern Territory (-1.00 per cent).
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