Usually consumer sentiment and retail spending go hand in hand but not according to the latest Deloitte Access Economics Retail Forecasts report, which says consumer sentiment has gone downwards, while retail spending is actually showing growth.
Deloitte Access Economics partner David Rumbens says the lift in growth is due to a rebound in full-time jobs growth and continued wealth gains from housing, but consumers are not happy at all.
“Despite improvements in unemployment expectations and an increase in business confidence, consumer sentiment is at a low point with concerns over financial risks,” he explains. “And in the face of oncoming competition from the likes of Amazon, widespread aggressive discounting to lure in the consumer dollar, and rising energy prices, it’s likely retailers aren’t so happy either.
“Nominal retail spending growth for the year to June 2017 was 3.6 per cent and we expect it to remain steady at that rate over the year to June 2018. However, more of the growth next year may come from volume growth, with prices increasingly under pressure. Retail volume growth for the year to June 2017 was 2.5 per cent, rising to 3.4 per cent for the year to June 2018.”
Real retail turnover over the June quarter was 1.5 per cent, which is the highest real growth result since the March quarter in 2013, and follows a subdued start to 2017 for retail spending growth.
“This signals an improved spending outlook after three months of negative turnover growth in the last year,” comments Rumbens.
Household goods are back on top, outpacing all other non-food retail categories in the year to June 2017, with 5.8 per cent real turnover growth. On the other side of the spectrum, real turnover growth for department stores remains weak over the past year at 1.3 per cent.
Also, retail price growth is minimal, at one per cent over the year to June 2017. “Intense competition is keeping all retailers focused on delivering customer value at the least cost possible,” says Rumbens. “The entry of Amazon and other international online retailers into the market over the coming years will only put further downward pressure on prices.”
By Marion Gerritsen