Deloitte survey confirms drop in discretionary spending.

 

Reflecting on-going cost of living pressures and subsequent spending trade-offs, retail sales in 2024 have stagnated as consumers await relief.

 

Releasing the latest edition of Deloitte Access Economics’ Retail Forecasts, Deloitte Access Economics partner and principal report author, David Rumbens, said: “The year has really begun with a fizzle rather than a bang for most retailers. with real spending contracting by 0.4 per cent over the March quarter of 2024. 

 

“A key driver of this has been the persistently high levels of price growth seen in essential spending outside of retail (rents, insurance, utilities) causing consumers cut to back on spending on discretionary retail.

 

“The latest monthly retail trade figures released earlier this month continue the sombre story with nominal retail turnover only increasing by 0.1 per cent over the month of April.

 

“The immediate road ahead is looking rocky, particularly as unemployment rises further. But there is also some sunshine - real wage growth, stage 3 tax cuts and interest rate cuts (eventually) will spur consumer spending later in 2024 and into 2025,” he said

 

Minimum wage hike a blessing and a curse

 

The Fair Work Commission’s decisions on 3 June to increase the minimum and award wages by 3.75 per cent is “something of a double-edged sword for the retail sector,” Rumbens said.

 

“On one hand this will provide a modest further boost to real wage growth for consumers, supporting the economy’s capacity to spend. On the other hand, the increase is higher than the retail sector wanted, and will place some businesses under further financial pressure, at a time when retail and hospitality insolvencies are already rising."

 

Alan Oster, NAB chief economist commented:

"In month-on-month, seasonally-adjusted terms, online retail sales growth accelerated in April, after being close to flat in March. The performance of online retail over the past few months has outpaced broader retail, leading to the continued increase in the online share.

 

"The results for food and beverage related goods are also worth highlighting. This is the second consecutive month where takeaway food has contracted, and the category has been relatively subdued since the start of the year. This is in contrast to growth in the online grocery and liquor category, which has outpaced it," he said.

 

Ben Dorber, ABS head of retail statistics, said:

“Underlying retail spending continues to be weak with a small rise in turnover in April not enough to make up for a fall in March. 

 

“Since the start of 2024, trend retail turnover has been flat as cautious consumers reduce their discretionary spending,” he said.

 

Photo credit: Matt Jelonek