Retail sales fall in June as economist says retail outlook is grim

Australia will see a tough 18 months ahead for the retail sector as the effects of the Federal Government’s stimulus package handouts dry up, the latest report by Access Economics shows.

ABS estimates of retail turnover released today show a 1% fall in July as compared with June.

The outlook for retailers is cloudy, with a new Access Economics report predicting retail sales will grow by just 1% in 2009-10 despite the economic recovery gaining momentum.

Access Economics’ report, released today, shows that although retail sales climbed 6.5% between November 2008 and May 2009, June saw the figure drop by 1.4%.

Retail sales growth over the year to June 2009 was up 4.1%, sustaining the same growth level of the previous decade.

But Access is tipping retail sales will grow by just 1% in 2009-10 and by 0.8% in 2010-11. Stronger growth of 3.7% will not return until 2011-2012.

Access director David Rumbens says that although the $21 billion stimulus “cash splash” added a temporary 5% to the income of the average Australian family, this “temporary windfall” is already drying up.

In addition, the recovery from the downturn has not yet extended to a reverse in rising unemployment. “Employment is not falling by much but it is not rising either,” Rumbens says.

This makes it near impossible for consumers to sustain the level of spending they enjoyed during the first half of this year, he argues

Meanwhile, the Reserve Bank has indicated that its next move on interest rates will likely to see it adjusting rates up – possibly before the unemployment rate peaks.

The next Federal Budget “may also include some decisions which will allow budget balance to be restored in a reasonable period,” Rumbens says.

“That means belt tightening from the Feds which will flow through to wider incomes.”

Today’s ABS statistics indicate small retailers may bear the brunt of the spending dry-up.

In July, sales for small retailers rose only 0.8%, compared to a 3.2% increase for chains and other large retailers.