Retailers anticipate solid Christmas sales

Roy Morgan’s annual Christmas retail sales forecasts, conducted in conjunction with the Australian Retailers Association, suggest Australians will spend over $54.3 billion across retail stores during the Christmas trading period, an increase of 2.8% from the $52.9 billion of retail expenditure during the 2019 Christmas trading period:

Roy Morgan’s annual Christmas retail sales forecasts conducted in conjunction with the Australian Retailers Association (ARA) indicate Australians will spend over $54.3 billion across retail stores during the Christmas trading period.

Forecast retail spending this Christmas of over $54.3 billion is an increase of 2.8% from the $52.9 billion of retail expenditure during the 2019 Christmas trading period and is a better than expected forecast than many would have thought possible during the year as Australia dealt with the unprecedented pandemic.

Because of the huge impact on spending patterns caused by COVID-19, and the associated lockdowns around Australia, spending across the six categories measured has diverged significantly during 2020.

The clearest example to highlight is the plunge in spending on Hospitality businesses as forced lockdowns closed restaurants, hotels, pubs and cafes for extended periods and the concomitant surge in spending on Food bought at supermarkets and other fresh food retailers that remained open.

The impact of COVID-19 measures on Hospitality businesses continues with social distancing measures in place and restrictions on the number of customers allowed in many States.

Unsurprisingly, the largest percentage increasing in spending is predicted for the Food category with pre-Christmas spending forecast to grow by a large 10% from a year ago to over $23.8 billion. Due to the impact of COVID-19 and the continuing restrictions, Hospitality spending is forecast to be 18.7% down on a year ago at just under $6.1 billion.

Analysing the two categories of Food & Hospitality together shows a combined growth rate of 2.6% from a year ago to total spending of over $29.9 billion – in line with overall retail growth predictions.

Growth in Household goods is expected to grow strongly on a year ago to be up by 9.6% to over $9.7 billion but spending on Clothing, Footwear and Accessories is set to be down 12.2% to $3.7 billion.

Department stores are set to experience a slight decline on a year ago, down by 2%, to overall spending of almost $3 billion. The category combining ‘Other retailing’ which includes online retailing is predicted to experience significant growth of 6.6% on a year ago to spending of over $8 billion.

Retail sales forecast to grow strongly in Queensland and Western Australia

Analysis of Roy Morgan’s pre-Christmas retail forecasts by State and Territory shows strong growth is expected in Queensland, Western Australia, South Australia and Tasmania although there are predicted to be declines in the two States most impacted by COVID-19, Victoria and New South Wales.

Christmas retail spending in Queensland is forecast to grow by 9.3% to almost $11.8 billion while spending in Western Australia is predicted to increase 14.2% to nearly $6.4 billion. Spending is forecast to grow strongly in South Australia by 11.8% to over $3.8 billion and up by 10.5% to $1.2 billion in Tasmania while there are also increases predicted for both the ACT and NT.

On the surface these figures appear exceptionally high, however an analysis of the real retail spending figures release by the ABS so far this year shows retail spending in these States been well over 10% higher than a year ago for many months.

There are several reasons for these large increases in spending which starts with the massive Government stimulus injected into the economy during 2020 valued at well over $100 billion including on JobKeeper wage subsidies, a doubled JobSeeker payment and allowing Australians in financial distress to withdraw up to $10,000 from their superannuation in two tranches during the year – for a total of up to $20,000.

In addition to all the extra stimulus being provided to the economy the restrictions on interstate and international travel have forced Australians to spend their money at home and certain categories of retail have been big beneficiaries so far this year.

However, despite these stimulus boosts the situation in the smaller States hasn’t been replicated in Australia’s two largest States which are more exposed to international trends – and this includes dealing with far more significant outbreaks of COVID-19 than elsewhere in the country.

Both Sydney and Melbourne attract larger numbers of international tourists and also rely heavily on foreign students, and both had ongoing community transmission throughout the year whereas other States have been largely on top of COVID-19 since April and May. Because of these different conditions Christmas spending in New South Wales is forecast to come in 0.7% lower than a year ago at $16.5 billion while a steeper decline of 3.3% to just under $13.4 billion is predicted for Victoria.

Michele Levine, Chief Executive Officer, Roy Morgan, says:

“When Australia locked down in March to deal with the rapidly spreading COVID-19 many expected 2020 would be a disastrous year for retailers. However, unprecedented Government action to stimulate the economy has supported many retailers throughout a tough year which is expected to see continued retail growth into year-end with Christmas spending forecast to grow 2.8% on a year ago to over $54.3 billion.

Real retail sales rebounded strongly over the September quarter as most of the nation recovered from shutdowns:

Pent-up demand alone should lead to solid retail sales.

Unconventional Economist
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