Retailers set for cautious consumer spending

Retailers will need to continue discounting in the lead-up to Christmas as consumers remain cautious about their spending, according to the latest CommSec research.



The research reveals retail spending grew by just 0.3% in the September quarter, falling below economists’ expectations of 0.5%. Non-food retailing experienced its slowest growth in four months.


CommSec economist Savanth Sebastian says smaller retailers fared better than their larger competitors, experiencing a 0.4% rise compared to 0.2%.


“The data for the September quarter shows that Aussies splashed out on toys, sporting goods and video games, and went out to restaurants in droves,” he says.


“But spending was slashed across a raft of retail categories including department stores.”


Compared with a year ago, cafe and restaurant sales are up 15.2%, and spending at footwear, watches and jewellery retailers is up 12.2%.


However, spending is down across almost half the retail categories, with specialised food outlets like butchers and seafood stores the worst affected, along with hardware, footwear, newsagents and clothing stores.


Sebastian says the latest retail sales figures highlight the widespread weakness in retail activity and the situation doesn’t look likely to improve.


“Despite five months of interest rate stability, coupled with the considerable discounting by retailers, consumers were only enticed to tentatively start spending,” he says.


“Retailers will need to continue discounting in the lead-up to Christmas… [The data] will give the Reserve Bank plenty of food for thought before deciding on further rate rises.”


Macquarie Group economist Ben Dinte says the Australian dollar’s elevation above parity with the US dollar will also erode retail sales in coming months.

“As the Aussie dollar continues to strengthen, I think that’s going to become more and more of an issue,” he says.


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