Prices and spending shift key drivers for retail growth
Rising inflation means prices rather than volumes are becoming the key driver of retail sales growth, according to the latest edition of Deloitte Access Economics’ Retail Forecasts.
Also, growth in spending on services is likely to exceed growth in spending on goods as Australians move on from the Covid pandemic and start spending on hospitality and travel again.
“Retail is still riding the post-pandemic high, with real retail spending growing 1.4 per cent through the June quarter after an already strong start to 2022,” Deloitte Access Economics partner and principal report author, David Rumbens, explains.
“That left real sales growth up 5.5 per cent over the year, with the spending spree particularly centred around discretionary categories.
“But cracks are starting to show as the economy faces a number of challenges. Retail prices increased 4.8 per cent through the year to the June quarter with the largest price rises seen in food and household goods.”
The price pinch will continue to be seen in retail over the next 12 months, says Rumbens. Sales volume growth is expected to come in at three per cent through the year to December 2022 and retail price growth is expected to peak at a much higher 5.9 per cent over the same period. Having prices as the main driver of nominal retail sales, or top line revenue, is relatively unfamiliar for retail.
“For now though, Australia is operating at close to full employment and retailers are concerned about having enough labour in such a tight labour market. Retail job vacancies have more than doubled since May 2019 with no sign of slowing down. These positions aren’t being filled and employment in the retail industry is lower than in May last year, down 1.2 per cent.
“While the labour market is expected to remain tight, there are actions retailers can take to attract new talent and retain and excite the talent they already have,” he adds.