Despite the lure of bargains and deals during,retail turnover for the December quarter grew at half the rate recorded during the same period last year,prompting KPMG to lower its forecasts for recovery in the sector,which has been in a “retail recession” for 12 months.
“We’re coming out of it,but we’re coming out of it slowly,” said KPMG national retail and consumer lead James Stewart.
“In reality,we probably bottomed in some respect last year. But the issue is the pace of the momentum coming out of it. It is just taking a while,and it’s going to take longer than what I think people would have hoped.”
KPMG’s previous retail health index report from September predicted a “modest acceleration in trading conditions”. But an incremental lift of 0.17 index points for the December quarter suggests “the overall health of the retail sector remains poor” and that “a balanced outcome by the end of 2024 may be at risk”,according to the December report.
In the second half of last year,consumers prioritised value for money,favouring and turning to and Temple and Webster to find better deals. Meanwhile,the likes of and Kathmandu have flagged a hit to sales and profits.
Many retail executives had expressed optimism of a lift in consumer spending power in the second half of the year,thanks to and the stabilisation and potential slashing of interest rates. Deloitte Access Economics predicted in December that the second half of 2024 would represent a “turning point” for the economy.
However,businesses will continue to contend with higher operating costs spanning electricity,fuel,manufacturing and packaging,and wages,as well as reluctant consumers.
“Anecdotally,a lot of retailer CEOs we engage with are realistic that the market is probably going to be a slow growth market for a little while,” Stewart said.
He said consumers were poised to potentially benefit from a retail recession as retailers are having to discount more heavily to encourage cashflow into the business,which puts margins under pressure. and with bargain-hungry shoppers.
Despite the current conditions,Stewart said food and household goods businesses would be fairly resilient as people still had to eat,and a flow of migrants coming to Australia increased demand for furniture.
“I don’t think any category will end up bruise-free,but inside each category you’ll have better performers than others,because of their business model and the way they go to market,” he said.
Consumer confidence was expected to remain gloomy until inflation eased or interest rates came down,he said.
The Reserve Bank has warned,and force more to cut their spending or even rely on charity,before higher wages and interest rate cuts provide some relief in 2025.
February had the largest fall in unemployment,which has by the Reserve.
The Albanese government has signalled that combatting the cost of living will be a key focus in its May budget.
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