Food and travel outshine “traditional” retail as sales rise 3.6%

Small business sales rose by 3.6% over the year to the three months to October, according to the latest ANZ report, as food and travel-related services continue to outshine “traditional” retailers.

The findings come from the latest ANZ Small Business Sales Trends report for October, which shows small business sales are 8.3% higher year-on-year.

In the three months to October, sales growth was particularly strong in the mining states of WA (7.1% year-on-year) and the Northern Territory (5.5% year-on-year).

In Queensland sales remained softer (2.9% year-on-year) amid several economic headwinds, including rising unemployment.

In NSW, trading conditions for small businesses have continued to improve gradually, with sales increasing by 3.6% year-on-year in the three months to October.

Sales growth in all other states remained relatively subdued.

The report shows sales of food and travel-related services continue to stand out – sales at restaurants, hotels and bars grew by around 6% year-on-year in the three months to October.

Meanwhile, sales of “traditional” retailers, such as those selling appliances, clothing and homewares, remained weak.

Nick Reade, ANZ general manager of small business, said there’s no doubt the environment continues to remain challenging for small business in Australia.

“Overall, growth in small business sales has remained quite soft and mixed across sectors and states,” Reade said in the report.

“It’s positive to see such a strong result for companies offering travel and food-related services, but for retailers selling appliances like fridges and TVs, clothing and household items, the outlook remains less favourable.”

“Looking ahead, companies will be under pressure to adapt to these conditions and remain competitive.”

“Those exposed to interest rate-sensitive parts of the economy, including housing and durables consumption, are likely to see some benefit from the reduction in interest rates.”

“Nevertheless, we expect only a gradual pick-up in these sectors during 2013.”

According to Justin Fabo, ANZ head of Australian economics, corporate and commercial, the underperformance of non-food retailing is, to some extent, a reflection of price competition.

“Price competition – itself related to the high Australian dollar – has been most fierce in goods-based retailing,” Fabo said in the report.

With regard to the states, Fabo said ANZ is “watching closely” to see how events unfold in WA, where the unemployment rate has risen from very low levels and job advertising has fallen.

“[These trends are] possibly foreshadowing some moderation in small business sales growth in that state,” he said.