Christmas spend fears
Retailers worry about consumer mindset
THERE will be no free kicks for the nation’s retailers this Christmas with shoppers tipped to spend broadly what they did during last year’s festive season as sliding housing prices hit personal budgets.
The worry for retailers during the most important trading period of the year is that the “wealth effect,” where rising housing prices fuel optimism and a willingness to spend more, is spluttering to a halt. A survey of consumers by Macquarie Wealth Management also notes online shopping continues to grow in popularity, with 53 per cent of respondents expecting to make more online purchases this year compared to last.
Clothing, electronics, entertainment and games and toys are the most likely to be purchased via the web, while the survey also found a pick-up in online food and liquor sales.
Based on these trends, Macquarie has written to its clients advising that its key picks from the sector are Wesfarmers, Coles and JB Hi-Fi.
“It is not easy out there for retailers – online keeps taking share, consumers are demanding more and, although sentiment is positive, there is apprehension on housing,” the investment bank said in a note to clients.
The going will be tough for retailers as consumers reassess their spending habits in the wake of weakening housing prices and other strains on the household budget, Macquarie warned.
“Respondents are broadly Austal chief executive David Singleton on the company’s new ship building contract planning on spending similar levels this year, with 61 per cent planning on spending the same, 21 per cent less and 18 per cent more,” it said.
“Retailers shouldn’t be expecting any easy wins this holiday season; retail sales data might still be in growth, but growth rates are decelerating.”
Most of the people surveyed by Macquarie – around 80 per cent – said they were “more positive” about their household financial situation, but when asked about the outlook for house prices over the next year the tone was bearish.
The majority – 79 per cent – expect prices to fall, 15 per cent expect prices to stay the same and only 6 per cent are tipping a rise.
“The wealth effect, which has been a strong support to the consumer, may be running out of gas,” Macquarie said.