To the dismay of retailers, consumers are holding back this festive season after one of the worst years on record.
Weak wage growth, high debt levels and increasing price pressures are hurting demand, while tax returns and interest rate cuts have yet to fully come through, says Deloitte Access Economics’ latest quarterly ‘Retail Forecasts’ subscriber report.
Deloitte’s recent Retailers’ Christmas Survey reveals that only 21 per cent (down from 41 per cent last year) of respondents expect a growth above five per cent this year.
Weak volumes and above-inflation retail price growth saw September post the weakest result since the 1990s recession, falling 0.2 per cent over the year, and this is expected to continue as consumers save instead of shop, according to the report.
Retail prices are surging on supply factors
Deloitte Access Economics Partner and Retail Forecasts Principal Author David Rumbens says retail price growth has been accelerating over the past year, with prices growing 2.6 per cent in the year to September quarter, which is the first time since 2009 that retail prices have consistently outpaced general price pressures in the economy.
This, he says, is not reflective of stronger demand, but rather increasing cost pressures from a weaker Australian dollar, the increase to the minimum wage, and supply disruptions from droughts and floods.
“With retailers being squeezed on both sides from weak sales volumes and increasing costs, margins are coming under pressure.”
Next year paints a more positive picture
However, next year could paint a different picture, with retail spending anticipated to grow 2.6 per cent over the year if house prices continue their upward trajectory and salaries and jobs growth outperform expectation, according to the report.
For further information visit: deloitte.com.au