Deloitte Access Economics Retail Forecasts

5 December 2024: After braving a retail recession in the middle of 2024, retailers can hope for a better year ahead, with strong October retail trade data and improving consumer sentiment suggesting the long-awaited consumer recovery is around the corner.

Releasing the latest edition of Deloitte Access Economics’ Retail Forecasts, Deloitte Access Economics partner and principal report author, David Rumbens, said: “The month of October saw nominal retail turnover lift by 0.6%, with consumers making the most of earlier than usual holiday discounting.

“We’ve seen this in a much earlier uplift in searches for “sales” in Google trends data compared to 2023. This suggests that consumers are starting to shift from saving to spending, especially when there are good deals on offer. This shift has likely continued into November, off the back of saturated Black Friday campaigns last week.

“This is a sign of hope after retailers have braved two retail recessions in the past 18 months. September quarterly retail data did show real (inflation adjusted) sales growth of 0.5%. But that was only the second quarter of positive real growth in the last two years. Real retail turnover was still a full 1.4% lower in September 2024 compared to September 2022.

“Part of the story has been an uptick in savings since tax cuts started making their way to consumers in July. How much consumers would spend was always going to be uncertain. National Accounts data released this week showed that household disposable income grew by 1.5% over the September quarter, while household consumption was flat. The household saving ratio ticked up from 2.4% in June to 3.2% in September as well. It was clear that consumers wanted to build back up their savings buffers and pay down mortgages before spending.

“But the tide is turning. The notable improvement in consumer sentiment in recent months and the extra dollars from tax cuts is starting to flow through to live retail data now.

“A rate cut from the RBA, whenever that might be next year, could be the green ‘go’ light consumers need to see before feeling comfortable letting loose.

“As a result, real retail turnover is expected to lift from -0.3% in calendar year 2024 to 2.1% in 2025 and 2.5% in 2026, as consumers get their spending groove back on.

“But like any good recovery story, there are also risks in the road ahead. Uncertain timing for the shift in consumer spending and the ‘discount dilemma’ remains crucial challenges for retailers. The impacts of potential trade policy changes from a new administration in the US and the upcoming domestic federal election may also introduce some bumps in 2025.

“However, these risks should not overshadow the fact that a consumer recovery is on the cards for 2025 and beyond.”

National real and nominal retail turnover

Source: ABS Retail Trade; 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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