Festive season to be more expensive
CHRISTMAS shopping will be more expensive this year, with retailers expected to pass on costs to consumers to get ahead of an upcoming “retail recession”, according to a forecast by Deloitte.
The latest Retail Forecasts report from Deloitte reveals that while nominal retail sales for the year to December are expected to jump by 10.4 per cent, this growth is mostly due to retail prices growing by 7.6 per cent in a bid for businesses to maintain their margins.
The retail sector in the September quarter boasted an increase of 2.3 per cent in nominal retail turnover, but rising inflation, interest rates and cost of living pressures are expected to finally affect consumer confidence.
Principal author of the report, David Rumbens, said consumer spending was expected to dip next year, in line with sentiment overseas.
“For now, we’re expecting the holiday season and end-ofyear events to throw the retail sector a lifeline,” Mr Rumbens said.
“Looking ahead, retailers are likely to face a difficult six months as they ring in the new year. With cost of living pressures and a mortgage rate squeeze clouding the horizon, retailers are growing pessimistic about the state of the consumer in 2023.”
In the US, nominal retail spending has decreased by 1.3 per cent and in the UK, sales volumes decreased by 3 per cent over the September quarter.
This slowdown is expected to reach Australia as well, with about 58 per cent of respondents to Deloitte’s Retailers’ Holiday Survey expecting consumer confidence to go down in 2023.
Over 2022-23, supermarkets, speciality food and liquor have seen negative growth, while cafes and restaurants saw significant 19 per cent growth in the same period.
“Sales are expected to curtail at the start of 2023. The result could see the sector entering a short and shallow ‘retail recession’” Mr Rumbens said. “Sales are likely to pick up through the second half of 2023, but result in a bottoming at zero real growth over the year to December 2023.”