Tuesday, June 18, 2024

Aussies predicted to spend $66.8b this Christmas

Pre-Christmas spending in 2023 is expected to edge in line with last year’s results.

Provisional forecasts by the Australian Retailers Association (ARA), in conjunction with Roy Morgan, predict $66.8 billion will be spent in the November to 24 December Christmas trading period, in line with last year (up slightly by 0.1% or $74,000).

The preliminary projection, however, is subject to monetary decisions by the Reserve Bank of Australia (RBA) and Australian Bureau of Statistics retail trade data in the months leading up to Christmas.

Food spending is tipped to encompass the lion’s share of spending, making up $26.7 billion of the overall spend. Compared to 2022, spending on food is projected to increase 2.4%, mainly driven by supply input price increases.

The categories of hospitality (down 4.2%), household goods (down 3.2%) and Clothing (down 0.8%) are bracing for a softening of spending in the lead up to Christmas 2023 as cost-of-living pressures continue to bite.

Department stores (up 2.9%) and other retailing (up 1.7%), which includes categories such as recreational goods, books, cosmetics, are poised to record sales growth on last year.

South Australia and the ACT are set to record the biggest growth in sales on last year (up 1.2%), followed by Tasmania (up 0.7%), Western Australia (up 0.5%), the Northern Territory (up 0.3%) and Victoria (up 0.2%).

Spending in Queensland (down 0.3%) and NSW (down 0.2%) is tipped to decline. Consumers in NSW are forecast to spend $21.1 billion in the pre-Christmas period, with Victorians to spend $17.1 billion.

ARA CEO Paul Zahra says a softening of spending on discretionary goods is expected given the current economic conditions and the persistent cost-of-living crunch gripping the nation.

“The marginal increase in spending this year is being inflated by supply chain price increases, particularly in food, and an overall increase in Australia’s population,” he says. “If you exclude these factors, overall Christmas spending is in decline.

“For many discretionary retailers, up to two-thirds of their profit is made during the all-important Christmas trading period, so it’s shaping up to be a period of business uncertainty this year.

“Last year, Christmas spending was bolstered by a record freedom spending phenomenon with delayed overseas travel, whereas this year, shoppers are expected to be much more conservative with their budgets.

“This year, we anticipate a bargain-driven Christmas shopper, who will actively seek out the best deals and look for value purchases.”

Mr Zahra says the success of the highly anticipated Christmas trading period will be at the mercy of upcoming cash rate decisions by the RBA.

“Australian mortgage-holders will be carefully watching the RBA’s decisions over the next few months with bated breath, but so too will retailers,” he says.

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