Friday, July 26, 2024

Income squeeze slams food retail

Weak underlying income growth is squeezing retail turnover in food categories, while non-food categories are still benefiting from low interest rates and asset price inflation according to the latest ‘Deloitte Retail Forecast’.

Overall, real (inflation-adjusted) retail sales growth was 2.5 per cent over 2015-16, which was a moderated rate compared with the 3.3 per cent growth seen over 2014-15. Deloitte expects that retail sales growth could slow further to two per cent over 2016-17, before recovering somewhat to three per cent over 2017-18.

Deloitte says while supermarkets have survived the competitive environment by pushing down supplier prices, costs may not have much further to fall and profits are being squeezed. Supermarket and catered food operators are now relying on population growth to increase their sales, as real retail turnover per capita decreases.

According to Deloitte, interest rates are expected to be “lower for longer”, as inflation is barely registering and, while growth is OK, it is below trend globally and at risk of returning below trend here.

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