Shoppers outlaid more on clothes and shoes, offsetting lower spending on eating out and takeaways to lift retail sales 0.3 per cent in October, but economists warn consumers will further tighten their belts next year.
Seasonally adjusted retail spending was $26.99 billion, up from $26.89 billion in September, according to Australian Bureau of Statistics data released on Thursday.
Household goods, retailing and clothing sales bounced after a weak September while cafes, restaurants and takeaways slipped 0.9 per cent, their biggest fall since August 2017. The annual retail sales growth rate held steady at 3.6 per cent with rises in food (0.2 per cent), household goods (0.6 per cent) and department stores (0.4 per cent).
Chief Asia-Pacific Macro Strategist Annette Beacher described the results as a “sigh of relief” following Wednesday’s GDP data, where falling house prices, stagnating wages and tighter lending standards were credited with weaker than expected 0.3 per cent economic growth in the September quarter.
ANZ economist Jo Masters said strong clothing sales were a result of ongoing retail price competition and that while the numbers were positive, households continued to face “several headwinds”.
“Not least, ongoing falls in housing prices. We note the loss of momentum in retail sales in NSW, where house prices falls have been the steepest,” she said.
Capital Economics senior economist Marcel Thieliant agreed that private consumption might hold steady before Christmas, but warned the “downturn in the housing market will result in further weakness in consumer spending next year”.
Meanwhile, Australian Retailers Association executive director Russell Zimmerman credited the housing market downturn for boosting furniture sales.
“Furniture has had a rebound this month. The housing market has gone soft so people are renovating and putting new furniture in their homes,” he said.
“We’re seeing some good numbers in that area of furniture and we put that down to the fact that people aren’t moving houses as much.”
Soaring inventories, headwinds
The growth in retail sales comes as traditional outlets battle sluggish wages growth, mounting competition from online retailers, including the first year of e-commerce behemoth Amazon in Australia, and rising bricks-and-mortar rental costs.
Mr Zimmerman raised concerns about department stores as retailers faced soaring inventory numbers, decreased foot traffic and competition from online shopping.
“Over the last 12 months, there’s not been a lot of joy in department stores, although we hope with Christmas around the corner we will see a resurgence,” he said.
Chief economist for BIS Oxford Economics Sarah Hunter wasn’t very optimistic.
“For bricks-and-mortar stores, the environment is particularly challenging. Competition from e-retailers is squeezing margins as well as volume of goods sold in stores,” she said. “We expect this trend to continue into the medium term.”
Major listed retailers responded positively to the quarterly figures. Wesfarmers was up 1.34 per cent, Myer increased by 1.25 per cent and Harvey Norman rose 1.7 per cent.
Date: December 6, 2018
Source: The Canberra Times