Gloom in retail sector set to continue

Despite forecast of slowing growth, there are signs of preparations for better times

April 30, 2012

Transport firms with an exposure to the Australian retail trade have had more bad news to ponder, with a slow start to the year expected to continue.

According to AFGC Chep Retail Index forecasts, the June-quarter rise in retail sales is likely to slow to 2.1 percent, from 2.5 percent in the March quarter.

However, Chep detects retail trade signals that the sector is preparing for a turnaround.

"Beyond the cooler summer’s impact on the traditional seasonal peak in supply chain activity, we are seeing highly efficient current stock holdings across both wholesalers and retailers, which implies businesses along the whole supply chain will see a rise in activity as demand returns," Chep Australia and New Zealand President Phillip Austin says.

AFGC Acting Chief Executive Geoffrey Annison says continuing sluggish retail conditions are making life very difficult for manufacturers, who are already struggling to cope with ongoing increases in costs and the fiercely competitive retail environment.

"Despite the challenges, food and grocery manufacturers are staying positive by seeking efficiencies across the entire supply chain, through improved processes and practices," Dr Annison adds.

The organisations believe the results of the AFGC Chep Retail Index point to ongoing weakness in household spending, driven by soft consumer sentiment which the 2011 interest rate cuts by the Reserve Bank had so far failed to overcome.

In trend terms, nominal retail spending growth fell to 2.5 percent over the year to February 2012 – "the lowest growth since September 2011, and well below the average growth over the last decade of more than 5.2 percent", they say.

The index, which has been in existence for 12 months, is based on Deloitte Analytics analysis of physical and product movements in Australian supply chains.

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