While things are tough at the moment for both consumers and retailers, there is light at the end of the tunnel according to the latest edition of Deloitte Access Economics’ Retail Forecasts.
Partner and principal report author, David Rumbens, admits that currently consumer sentiment is weak and retail sales in real terms are going backwards, however, Australian retailers should also have an eye to growth.
“What was seen as a risk to retail sales in the first half of 2023 became a reality for retailers in the December quarter of 2022,” he explains.
“We’re entering a period where higher interest rates will take a chunk more out of disposable incomes for consumers and increase the proportion of mortgage holders at risk of mortgage stress. Unsurprisingly, this has stoked consumer caution with sentiment diving with the RBA’s latest rate hike.”
Non-food sectors are forecast to experience the brunt of the retail slowdown as consumers prioritise nondiscretionary items, with real non-food sales expected to see a contraction of around minus three per cent, while food retailing should stay afloat with growth of 2.8 per cent over 2023.
“The tight consumer environment risks real retail spending going further backwards over the first half of 2023 and this may result in weak growth of just 0.1 per cent for real retail trade over the 2023 calendar year.”
However, 2023 might end on a brighter note, according to Rumbens.
“Real wage growth and consumers getting their spending mojo back, population growth, a return of tourists and a pick-up in residential construction will all push the retail sector into a brighter 2024.
“Stoked by non-food and food retail increasing by 2.4 per cent and 1.5 per cent respectively, real retail turnover is expected to bounce back in 2024 to 1.9 per cent, when price growth should also be far more constrained.
“So, a better growth future for retailers may be with us as soon as the end of 2023.”
