Retailers anticipate soft Christmas sales

Roy Morgan’s annual Christmas retail sales forecasts, conducted in conjunction with the Australian Retailers Association, suggest Australians will spend over $52.7 billion across retail stores during the Christmas trading period, an increase of 2.6% from the $51.4 billion of retail expenditure during the 2018 Christmas trading period:

Growth in retail expenditure is predicted across all six categories measured with spending on Food expected to grow by 3.2% from a year ago to nearly $21.7 billion. Also set to grow strongly will be Apparel including clothing, footwear and accessories up 3% to almost $4.2 billion.

Hospitality businesses are forecast to grow by 2.3% to an expenditure of well over $7.4 billion and an impressive $8.8 billion is expected to be spent on Household Goods this Christmas, an increase of 0.6% from a year ago. Department stores are set to experience slower growth than other categories, up by 0.5%, to overall spending of almost $3 billion.

The category combining ‘Other retailing’ which includes online retailing is predicted to experience the fastest growth of all, up by 3.7% to spending of over $7.6 billion.

Retail sales forecast to grow most strongly in Queensland, Victoria and Tasmania

Analysis of Roy Morgan’s pre-Christmas retail forecasts by State and Territory shows growth is expected across the nation led by Queensland, up by 3.6% to over $10.6 billion.

Christmas retail spending is also forecast to grow strongly in Victoria, up by 3% to over $13.8 billion and Tasmania up by 2.3% to $1.06 billion. Australia’s largest State of New South Wales is forecast to have Christmas retail spending of nearly $16.8 billion, an increase of 2% with a similar level of growth expected in South Australia, up 2.1% to $3.4 billion.

Forecast Christmas retail spending in Western Australia is predicted to increase by 1.7% to over $5.5 billion while there are also increases predicted for both the ACT and NT.

While the 2.6% increase in retail sales growth sounds okay, it is actually very weak given population growth is running at 1.6% and inflation is running at 1.7 (i.e. 3.3% combined)%.

These forecasts also appear bullish given retail volumes registered their first annual decline in the September quarter:

It’s shaping up as a bad Christmas for retail.

Leith van Onselen

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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