Deloitte Access Economics Retail Forecasts

5 JUNE 2024: Reflecting ongoing cost of living pressures and subsequent spending trade-offs, retail salesin 2024 have stagnated as consumers await relief.

Releasing the latest edition of Deloitte Access Economics’ Retail Forecasts, Deloitte Access Economics partner and principal report author, David Rumbens, said: “The year has really begun with a fizzle ratherthan a bang for most retailers. With real spending contracting by 0.4% over the March quarter of 2024,many retailers have lost the gains achieved over the Black Friday sales as consumer frugality comes backin vogue.

“A key driver of this has been the persistently high levels of price growth seen in essential spending outside of retail (rents, insurance, utilities) causing consumers cut to back on spending on discretionary retail.

“The latest monthly Retail Trade figures released last week continue the sombre story with nominal retail turnover only increasing by 0.1% over the month of April.

“The immediate road ahead is looking rocky, particularly as unemployment rises further. But there is also some sunshine - real wage growth, stage 3 tax cuts and interest rate cuts (eventually) will spur consumer spending later in 2024 and into 2025.

“Throwing a spanner in the works is the slow down in population growth working through – mostly as the post-COVID catch up runs its course. With per capita spending stagnating or contracting for the last seven consecutive quarters, more moderate population growth risks dampening the retail recovery.”

Minimum wage hike a blessing and a curse

The Fair Work Commission’s decisions on the 3rd of June to increase the minimum and award wages by 3.75% is “something of a double-edged sword for the retail sector,” Rumbens said.

“On the one hand this will provide a modest further boost to real wage growth for consumers, supporting the economy’s capacity to spend. On the other hand, the increase is higher than the retail sector wanted,and will place some businesses under further financial pressure, at a time when retail and hospitality insolvencies are already rising.

“However, retailers should be expecting some lift in consumer spending this year – the key question will be when, and to what extent.

”Real retail turnover is expected to increase from 0.0% in calendar 2024 to 2.3% in 2025. Household goods turnover should pick up more with better economic conditions and with an uplift in national building activity, supported by the Government’s ambitious housing targets. The additional dollars from tax cuts later this year may bump up spending at cafes, restaurants and takeaway in the September and December quarters.

National real retail turnover (year-to)

Source: ABS; Deloitte Access Economics

Retail Forecasts is produced quarterly and provides analysis of current retail spending and the economic drivers that influence this. It includes ten year forecasts of retail sales by major category and of key economic drivers.

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