Retail sales fall as global conditions spook consumers

Retail sales fell unexpectedly in June as consumers remain nervous about the global economy – a sentiment also being felt by the business sector, particularly SMEs.

New data from the Australian Bureau of Statistics shows retail sales fell by 0.1% in June despite economists predicting sales would increase by 0.4%.

The ABS figures reveal retail trade fell to a seasonally adjusted $20.54 billion, compared to a downwardly revised $20.567 billion in May.

Consumers have been building up their savings since the global financial crisis, even as unemployment levels remain close to the 5% mark.

Near defaults by several European countries, and the recent political unrest in the US over raising the nation’s debt ceiling, have added to local fears about the economic outlook.

Among the states, South Australia saw retail sales slide 0.8% in June while the ACT posted a 0.7% decline. Turnover fell 0.5% in both NSW and WA, while it eased 0.1% in Victoria and was flat in Tasmania.

Queensland bucked the trend with a 0.2% gain, while sales in the Northern Territory rose by 0.6% cent.

According to the ABS, department stores were among the hardest hit, posting a 3.2% fall for the month, followed by household goods retailing, which fell 0.7%.

Cafés, restaurants and takeaway food services also posted a 0.7% drop. Turnover rose by 0.4% for food retailers while clothing, footwear and personal accessory retailing added 0.2%.

Meanwhile, the latest Australian Performance of Services Index reveals the overall level of activity in the services sector was broadly unchanged in July.

The index – compiled by Australian Industry Group and the Commonwealth Bank – was up 0.3 points to 48.8 points, remaining below the 50-point level separating expansion from contraction.

The seasonally-adjusted index has been in negative territory for 10 of the past 12 months.

AIG chief executive Heather Ridout says most service businesses continue to experience soft trading conditions.

“Generally, the positive effects of the [resources] boom are being outweighed by consumer caution, interest rate concerns, a very flat construction sector and uncertainty over the impacts of proposed climate policy measures,” Ridout says.

Soft trading conditions are having a big impact on business confidence, with the latest NAB business survey revealing confidence among SMEs weakened sharply in the June quarter.

“At an aggregate level, SMEs are less optimistic than larger firms,” the report says.

The most significant falls in business confidence were reported in property, construction, finance and retail, while confidence in health and business services improved.

Confidence levels fell across all major states, with SA recording the lowest level of confidence followed by NSW and Queensland.

“WA and Victoria are the most optimistic about near-term activity, although confidence even in these states is relatively poor,” the report says.