Retail growth outlook slows to zero after fall in monthly retail turnover

The Australian Retailers Association warns the retail growth outlook is likely to slow to zero following a fall of 0.2% in retail turnover in April.

Figures released yesterday by the Australian Bureau of Statistics show that retail turnover fell 0.2% in April 2012 seasonally adjusted, following a rise of 1.1% in March 2012.

The largest contributor to the fall was household goods retailing, which fell 0.8%, followed by other retailing, which fell 0.7%, and department stores, which fell 1%.

The state which was the largest contributor to the fall was Victoria with a fall of 1.6%.

Russell Zimmerman, executive director of the ARA, told SmartCompany the association’s projection is that retail figures will continue to show slow to zero growth over the next few months.

“The ABS figures show a 0.2% decline, which shows that retailing is still feeling it very tough, particularly in some areas like clothing and footwear and department stores.

“The other thing is that we have a consumer out there that is not feeling confident; and that confidence is lacking because we have a minority government that is hampered in what it wants to do and it makes it difficult for consumers to have buoyancy and spend money,” says Zimmerman.

“People are seeing job losses in various industries and there are changes in industry. Some months ago now, we saw issues in the car and steel industry. All those things are making consumers very nervous, so I think we need to see some stability and confidence return from the top down from the government.”

Zimmerman says although the ARA calculated a 2.4% increase in sales compared to April last year, food retailing and other retailing are the categories responsible for this growth, showing Australians are spending on necessities and smaller goods while forfeiting larger purchases in the absence of discretionary dollars.

He says the Australian dollar falling to US 96.79 cents – its lowest point in seven months – is likely to affect retailers as well if it continues to fall.

“That obviously is going to make an impact on the price of goods. Because we rely so heavily on imports coming into the country, those prices rise as the dollar drops,” says Zimmerman.

However, Paul Bloxham, chief economist at HSBC, told SmartCompany he expected weak growth in the retail sector for the rest of the year.

“The 0.2% fall follows a 1.1% rise in March. We know these numbers are fairly volatile month to month; really what we are telling you is modest to retail growth in retail, but it is not falling,” says Bloxham.

“Over the year you have seen growth in retail sales of 2.4%. It is fairly weak growth; the retail sector is one of the weaker parts of the Australian economy.”

“Department store sales have been very weak in particular. That is because they are directly competing with online providers; that is one of the key things that has put department stores under pressure, along with the strength of the Aussie dollar which means that Australians are travelling more and shopping overseas rather than here,” says Bloxham.

Bloxham’s forecast is for the retail sector to record modest growth for the rest of the year.

“The retail sector will get a bit of support in the second part of the year, given that RBA has cut interest rates, but I would not be expecting retail to go gangbusters. We will continue to see modest growth into the second half.”