Retail sector pessimistic about key Christmas period

SAMANTHA WOODHILL
The Australian
October 3, 2017
The retail sector’s expectations leading up to the crucial Christmas period have plummeted to a four-year low, according to a new survey.
Expectations in retail approaching the holiday period were down 50 per cent on the previous year and down 70 per cent from what they were in 2015, said Dun & Bradstreet’s Business Expectations Survey for September.
“Whether it’s talk of Amazon entering the market of the high levels of household debt affecting consumer spending, it’s clear many retailers are down in confidence and the upcoming Christmas period is doing little to lift spirits,” said Dun & Bradstreet CEO Simon Bligh.
Across all sectors, business expectations for the holiday period are flat, despite an uptick in midyear trading. Companies are predicting weaker sales and lower employment for the final quarter of 2017, with retailers the most pessimistic of any sector about business growth.
“As 2017 draws to close, business expectations remain broadly steady, which points to ongoing moderate economic growth,” Mr Bligh said.
“Actual business activity ticked higher in the June quarter, but it remains in a range that points to the economy neither being strong nor weak, but rather something in between.”
Manufacturing firms saw a drop-off in business optimism, with 17.6 per cent of manufacturing businesses saying they would prefer a lower Australian dollar, compared to an average of 9.7 per cent across all sectors.
“Business expectations in manufacturing have taken a sharp turn lower, which appears to be linked to the recent strength in the Australian dollar which is undermining the sector’s international competitiveness,” said Dun & Bradstreet economic adviser Stephen Koukoulas.
“Indeed, manufacturing is poised for a period of severe weakness with expected profits, sales and capital expenditure at the lowest level in at least four years.”
Expectations for capital investment across all sectors increased slightly, with actual investment activity up from the previous quarter. Around 16 per cent of businesses increased their capital expenditure, while around 8 per cent decreased capital expenditure compared to the previous year.
“The current reading of expected capital expenditure is marginally above the long term average which, if realised in the second half of 2017, will be a positive for actual investment,” Mr Koukoulas said.
“One of the concerns for the economy in recent years has been the weakness in capital expenditure.
“While expectations have been generally positive over that time, the momentum has not translated to a pick-up in activity.”