Cash flow

Retail Sales Tipped To Recover In 2012-13, Deloitte Access Economics Report: Cashflow

Australian retailers tipped to emerge from two-year slump

By Michelle Hammond
Thursday, 08 March 2012

Retailers can rest assured the industry will emerge from its two-year slump next financial year, according to Deloitte Access Economics, which predicts sales to increase by 2.6% in 2012-13.


According to a new report by Deloitte, sales volumes will edge up 1.2% this financial year and 2.6% in 2012-13, after growing by just 0.7% in 2010-11.


The forecast lift is still well below what retailers enjoyed before the global financial crisis.


Clothing and shoe stores have been among the hardest hit, with the report forecasting sales in this subsector will plunge by 6.5% this financial year.


The report said, however, that in 2012-13 apparel and footwear shops would experience the strongest growth among retailers, as Australian firms capture more online spending.


Stores selling household goods are also forecast to see a solid sales rise next financial year, based on a prediction the construction industry will bounce back.


Since the GFC households have curbed their spending, while saving more than 12% of their income. Deloitte says wages will be a key driver of stronger retail conditions in the coming year.


Official figures published yesterday suggest the savings rate is stabilising at near 9%. According to Deloitte, this will allow more future income gains to be spent.


“Retail growth will be particularly supported by real wage growth and a leveling out in the savings rate,” Deloitte said in its report.


The news comes after the Reserve Bank’s decision to leave the cash rate unchanged at 4.25% this month, which, according to the Australian Retailers Association, is an “insult” to retailers.


According to the ARA, retailers are entering into the “dangerous territory” of downgraded profit expectations and store closures, as consumers continue not spending.


“January retail trade figures released by [the Australian Bureau of Statistics] were largely a reflection of the current consumer mindset, which is to wait for bargains before spending at all,” ARA executive director Russell Zimmerman says.


“In a month where it should be business as usual for retailers, consumers are retreating in order to absorb the impact of unmanageable interest rates imposed by the big banks.”


“Retailers have to make decisions based on the pressures they’re currently facing and unfortunately this may mean further store closures and job losses.”

Figures released today by the ABS show the unemployment rate rose to 5.2% in February, driven by fewer part-time jobs, suggesting the ARA’s job loss claims could eventuate.


The total number of jobs in Australia fell by 15,400, or 0.1%, to 11.44 million during February.


Part-time employment fell by 15,400 to 3,380,400, while full-time employment remained steady. The participation rate fell by 0.1% to 65.2%, despite expectations it would remain steady.

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