Retailers have little to whinge about

Michael Pascoe
August 2, 2012
The Age

The gap continues to widen between what consumers say and what they do as retail spending surged ahead in the June quarter. And the dollars going into tills have implications for the overall economy as well as the ability of retailers to whinge.

While the headline seasonally adjusted June retail sales figure surprised on the upside with growth of 1 per cent as the federal government’s mini cash splash hit home, the bigger story is the trend measure recording growth of 0.5 per cent for the month and the two previous months being revised up to that same figure.

The 1.5 per cent rise in the trend count for the June quarter indicates the consumption surge that lifted the March quarter GDP figures is continuing. What’s more, consumption and retail sales might be resuming the correlation that had broken down over the past two years.

Over the latest financial year, the trend sales growth was a respectable 4.1 per cent. Annualise the performance over the latest quarter though and it’s an outstanding 6 per cent.

Small business still struggling

With two exceptions then, retailers don’t have all that much to whinge about on the customer side of their businesses. The exceptions are small retailers and those most directly impacted by our low rate of household formation.

In the ABS original estimate before seasonal and trend adjustments, June sales for chains and other large retailers rose by 1.3 per cent. The original estimate for smaller retailers fell by 2.2 per cent. The big guys continue to eat the little guys’ lunch – and their market share.

And while all the ABS key retail categories recording sales growth in the month and even the department stores managed a trend rise of 0.8 per cent to be selling more stuff than they were a year ago, household goods retailing improved by just 0.1 per cent.

The subgroups within that laggard category tell the story of our low housing starts and household formation. “Furniture, floor coverings, houseware and textile goods” – the stuff people buy when setting up house – fell by 0.2 per cent in trend terms and 0.7 per cent seasonally adjusted.

What we seem to be best at is eating out. Expensive and over-geared restaurants might be closing their doors, but trend spending on cafes, restaurants and takeaway food services jumped by 1.1 per cent.

Splitting up the nation

Among the states, the surprise was New South Wales equaling Western Australia’s trend growth of 0.8 per cent, a notch ahead of Queensland’s 0.7 per cent. Tasmania fell 0.1 per cent and Victoria rose by the same meager amount as that state continues to carry most of the downbeat manufacturing job stories.

For the big picture, the total retail sales graph now shows a definite lift after being boringly steady around monthly growth of 0.3 per cent or so. The punters might say they have little confidence, but they have been opening their wallets in a manner that suggests something else.

For the retailers, the challenge remains profitability. Customers spending is only half of the equation.

Michael Pascoe is a BusinessDay contributing editor.

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