Financial advisory firm Deloitte has delivered a candid snapshot of the economic climate for retail in Australia – and what's to come.
The research, part of the latest Deloitte Access Economics Retail Forecast, has branded the current local economy “sluggish”, with retail spending still below trend.
The report also alluded to 2012 as a disappointing year for retail, with household goods retailers, clothing retailers and department stores hard hit.
The better performing sectors over the past year have emerged as food, cafes and restaurants, and the “other” retailing sector, which includes a number of pure play internet retailers.
Across the country retailers also continue to face mixed fortunes, according to the study.
Western Australian retailers have just enjoyed two years of very strong retail growth, while over 2012 retail has also done well in the Northern Territory.
Retail sales have seen solid growth in Queensland despite a patchy economy and in the Australian Capital Territory, defying Federal government restraint.
The report also noted that the New South Wales retail market has “under performed for some time”, but may be finally starting to lift thanks to deep interest rate cuts and resulting signs of life in the state's housing market.
Over the past year retail has had a dismal run in Victoria, South Australia and Tasmania, with the report stating that retail sales may grow only slowly in those states until a lower Australian dollar comes into effect.
However, the figures going forward for most states indicate that the future holds more promise.
“While the start of 2013 may see a soft demand environment continue for retail, there are some positive signs on the economic horizon.
"Low interest rates have yet to fully work through, asset price gains may be finally becoming a positive support to spending, consumer confidence is on a rising trend, housing activity has finally started to lift, and the household savings rate has levelled out, so future consumer spending growth should at least match income growth.”
By financial year, real (inflation-adjusted) retail sales growth is expected to record a gain of 2.2 per cent in 2012-13.
Retail growth may lift marginally in 2013-14 (2.5 per cent), before improving to 3.6 per cent in 2014-15 as broader economic conditions and housing activity improve.
Experts behind the study also advised that cost control will be key for retailers until the recovery starts to kick in.
“In order to keep prices low on a sustainable basis, and remain competitive in the market, cost control is the key.
"A key item for retailers is labour costs, and wage growth in the retail sector recently slowed to the same pace it saw in the immediate post-GFC environment, suggesting that retailers are having some success in containing their cost growth in a tough environment.”