Retail spending will tread water in the first half of 2009, with little growth in real retail spending being realised until the second half of 2010
Real retail spending will tread water in the first half of 2009, with little growth in real retail spending being realised until the second half of 2010, according to Access Economics.
The firm’s Retail Forecasts February 2009 report, released today, suggests the key economic events yet to unfold in 2009 for retailers are centred on unemployment and house prices.
On the former, Access says there is further bad news in the pipeline with the number of people unemployed expected to increase by 300,000 in 2009 (based on Federal Treasury’s estimates).
“That means a big loss of labour income, and will serve to keep consumers ultra cautious with any spare cash they may have,” the firm says.
On house prices, average prices fell by 3 percent in 2008 and a further fall in the order of 5-10 percent is likely in 2009.
“But house prices in the US, UK and many other developed economies have fallen by much more so there is the risk of a notably worse scenario for retailers than the one mapped out here,” Access says.
“Either way, retailers face a tough road ahead. Many (particularly at the more discretionary end) have already started to trim their own workforces.
“Even if our banking system holds up there are major challenges ahead. Global trade has slowed and Australia is only just starting to feel the effects of a big decline in commodity prices.”
While the Federal government’s initial stimulus package lifted retail sales by 3.8 percent (in nominal terms) in December, Access forecasts real retail sales to grow by just 0.8 percent 2008-09 and 0.2 percent in 2009-10.
A modest retail sales recovery will take place in 2010-11 assisted by stronger housing activity, with growth of 1.7 percent expected.
“The largest cuts to interest rates in living memory have benefited mortgage belts across the country – however, job losses will temper any flow on effects for retailers,” the firm adds.
“It is the resource-rich states that will bear the brunt of the lost income from the slowdown. The unwinding of the commodity and mining investment boom will take the lustre out of the Western Australian, Northern Territory and Queensland economies over the next few years.”