The income recession afflicting Australian households has retailers worried. From Stephen Koukoulas (aka ‘The Kouk’) at Dun & Bradstreet:
Business sentiment remains flat moving into the final quarter of 2017, despite an uptick in mid-year trading. In Dun & Bradstreet’s September Business Expectations Survey companies are predicting weaker sales, lower employment and a decline in selling prices; however, profits and capital investment are tipped to rise in the last months of the year. The upcoming Christmas period has done little to lift spirits in the troubled Retail sector, with expectations uncharacteristically low for the December quarter…
Dun & Bradstreet’s Business Expectations Index stands at 16.4 points for the December quarter of 2017, down marginally from the 16.7 points recorded in the previous quarter, and down from 17.0 points in the previous corresponding period…
Sentiments within the Retail sector remain subdued: while expectations have ticked upward for the fourth quarter compared to the third quarter, the current result is substantially lower than prior corresponding quarters.
Retailers are the least upbeat about business growth across all sectors: 55.4 percent of retail firms said they were more optimistic about business growth in the year ahead compared to the previous year, while 35.7 percent are less optimistic. Wholesalers are the most upbeat, with 69.8 percent feeling more optimistic compared to 20.8 percent feeling less optimistic.
Meanwhile, Manufacturing firms saw a notable drop-off in optimism in the September survey, with Q4 sales, profits and capital investment expectations falling to multi-year lows…
Actual and expected employment figures have remained largely steady. Some 21.5 percent of executives expect to employ more staff in the fourth quarter 2017 compared to the fourth quarter 2016, while 8.1 percent expect to decrease their staff numbers. In Q2, 20.3 percent of businesses employed more staff than a year earlier, compared to the 12.2 percent that reduced their employment levels.
Services firms had the highest expectations for employment in the coming quarter, and the highest actual employment results for the June quarter. Retailers, on the flip side, had both the lowest employment expectation score and the lowest employment actual score.
I am not surprised that retailers are feeling pessimistic about Christmas’ retail sales. Household income growth has been negative:
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And consumption has been held-up by a cratering in the household savings rate to the lowest level since the GFC:
Running down savings to maintain consumption is clearly unsustainable and unless real income growth turns positive, consumption spending is bound to take a hit, directly impacting retailers.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
