A ‘gap year’ for Australian retail, says Deloitte

According to Deloitte Access Economics’ latest quarterly Retail Forecasts subscriber report (Q1 2019), 2019 might be a gap year for retail in Australia. Real retail turnover growth is expected to slip from 2.2% in calendar 2018 to a more modest 1.6% growth in 2019, before lifting back to 2.2% growth in 2020.

Retail sales weakened in 2018, with real retail turnover expanding by 2.2% over the year, weakness that is expected to extend into 2019, as housing market pressures and lacklustre income growth hurt household budgets.

“Australia’s retail sector has been sustaining a reasonable rate of sales growth in an unconventional way – not so much from income growth, but leveraging off consumers’ willingness to spend. That willingness to spend has been supported by very strong asset price growth, creating a massive windfall for one set of consumers. But for another, and largely separate group, they have been associated with a significant lift in debt commitments,” said David Rumbens, Deloitte Access Economics partner and Retail Forecasts principal author.

Overall consumer spending growth over the past five years has averaged 2.5% per annum, but growth is household disposable income has only averaged 1.9%.

“And when overall net wealth is heading downwards, it provides a fairly strong incentive for people to be more prudent with their cash. That leaves 2019 as retail’s gap year – nursing a hangover before getting ready to move ahead in a year’s time,” Rumbens observed.

However, he also said that like all good gap years, retailers can use the opportunity to position themselves for recovery and success.