Friday, July 19, 2024

Consumer spending remains strong

Retail sales continued to strengthen in October with sales increasing 12.9% in October compared to the same time last year, according to Mastercard SpendingPulse. Sales were also up 28.2% on pre-pandemic levels.

All retail categories recorded significant year on year sales growth as we cycle the lockdowns of 2021. Lodging once again recorded the biggest increase in October, up 60.3% compared to 12 months prior, followed by jewellery (up 41.1%), apparel (up 40%), electronics (up 30.5%) and home furnishings (up 21.5%).

Australian Retailers Association (ARA) CEO Paul Zahra says the Mastercard SpendingPulse numbers reinforce ARA’s forecasts about the strength of the retail economy heading into the Christmas trading period.

“Retail performance this year continues to be outstanding, despite a dramatic drop in consumer confidence due to inflation. The Delta lockdowns of 2021 are a driving factor behind the substantial growth we’ve seen in the year-on-year comparisons along with price increases,” he says.

“It’s encouraging to see categories such as lodging and apparel bounce back from the dramatic setbacks of the pandemic with the continued strength in jewellery sales demonstrating the resilience of luxury retail.

“This strong sales momentum bodes well for the most important retail trading period – Christmas – which we are forecasting will continue to deliver growth. The ARA holiday sales predictions with Roy Morgan show Australians will spend nearly $64 billion in the lead up to Christmas, up 3% on last year.

“We recognise the impact of rising interest rates and inflation on households, and we anticipate a lag effect on consumer spending, with a softening of sales likely to occur in 2023.

“Unfortunately, the biggest trading challenges for retail right now are crippling staff shortages and managing ongoing supply chain disruptions.

“We also acknowledge the challenge many small businesses continue to have as they contend with rising operating costs associated with fuel, energy, supply chains and rent. The Christmas trading period is particularly important for these businesses as they replenish their cash reserves, in preparation for what is likely to be a challenging year ahead.”

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