Retailers on course for $39.9bn in Christmas sales

Retail sales are predicted to hit $39.9 billion this Christmas, up $1.4 billion from last year, according to the Australian Retailers Association.


ARA executive director Russell Zimmerman says despite the prediction of an increased figure, consumers are still suffering from a “post-GFC hangover”.


“This year has been tough for retailers, with consumers… being very careful about opening their purses and spending on particular items, especially clothing, footwear and bigger ticket household items,” he says.


“Retailers are usually optimistic in the lead-up to Christmas but this year their spirits have been dampened, with over 60% of retailers expecting trade over the Christmas period to be lower than last year.”


In a bid to encourage consumer spending, retailers are already offering discounts of up to 30% off, two-for-one deals, and complimentary gifts with purchases.


According to the Australian Bureau of Statistics, household consumption growth slowed to 0.6% in the September quarter, down from 1.4% in the previous year.


A breakdown of household spending reveals households are spending more on clothing and footwear, rent and other living costs, health, recreation and culture, and hotels, cafes and restaurants.


Households are spending less on cigarettes and tobacco, alcohol, communications, vehicles, and bills including electricity and gas.


According to ANZ, the slowdown in household spending has come despite a strong rise in household disposable income, up 2.3%, which can be largely attributed to strong employment growth.


“As a result, the household savings rate rose again in Q3 to 10.2%, the highest rate since June 2009,” ANZ says.


“This implies a substantial behavioural shift in Australian households… Most of the savings in household savings appears voluntarily, with the household debt servicing ratio broadly steady at 10.5% in Q3.”


Westpac agrees with ANZ, stating the cautious consumer has been even more cautious than previously indicated and remains firmly in “lock-down mode”.


“There were strong gains in small ticket discretionary items – cafes and restaurants, and recreation and culture in particular – but lackluster spending on big ticket discretionary items with furniture and household appliances up just 0.1% for the quarter,” Westpac says.


According to Westpac, total wage income rose 1.4% in the quarter, building on a 3% jump in Q2 and a 1.9% jump in Q1 to sit at 7.3%, the strongest annual growth since March 2008.


Real household disposable income rose 1.9% for the quarter, the strongest quarterly rise since the stimulus payment boost in 2008, and prior to that since 2006.


The ABS data shows households have been saving 10% of their disposable income over the last two years, more than doubling previous savings rates estimates.


“The numbers suggest the cautious, risk-averse, debt-averse consumer behaviour… has been both more intense and more persistent than previously thought,” Westpac says.


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