TWO surveys released this week have predicted the retail sector will be left behind in 2011, as consumer apathy shrinks sales and the wider economy grows on the strength of the resources sector.
TWO surveys released this week have predicted the retail sector will be left behind in 2011, as consumer apathy shrinks sales and the wider economy grows on the strength of the resources sector.
Retail spending rose by just 0.3 per cent in November, after a 0.8 per cent slide in October.
According to CommSec, retail spending rose by just 1.3 per cent during the past year, the second weakest reading in five years, surpassed only by the 1 per cent annualised growth experienced in May 2010.
Western Australia was among the weaker states in terms of retail trade, with sales down 0.2 per cent for the year.
Sales were also down in the Northern Territory and South Australia.
Sales lifted in the ACT (1 per cent), NSW and Tasmania (0.6 per cent) and Victoria (0.2 per cent).
Part of the slide in retail sales, CommSec economist Savanth Sebastian said, could be blamed on lower prices, rather than weaker spending, considering the widespread discounting occurring across the retail sector.
“Retailers have certainly done it tough over the past year,” he said.
“In fact, retail activity levels were much more buoyant during the global financial crisis, with annualised growth rates of around six to 7 per cent.
“It is clear that cumulative rate hikes have taken their toll on the household budget, and as a result, discretionary spending is being pared back.”
The Dun & Bradstreet business expectations survey, released early this week, was bullish about the wider economy, but also predicted retailers would struggle in 2011.
However, Dun & Bradstreet’s survey showed companies that were exposed to emerging economies in Asia were keeping the economy going full steam ahead.
The survey showed near record expectations for sales, profits, capital investment, employment and inventories across Australia, despite retailers reporting some of their most difficult circumstances for years.
Dun & Bradstreet director of corporate affairs Damian Karmelich said the result showed a clear gap emerging between retailers and the rest of the economy.
“During the Christmas period there has been an understandable focus on the challenges faced by retailers and the survey shows that retailers are preparing to discount in response to those challenges,” he said.
“However, for firms engaged in business-to-business trade and exposed to the growth of emerging economies like China, the outlook is positive.
“There is a clear distinction between retailers and the rest in actual performance.
“The non-retail sector is driving the economy while retailers struggle with household deleveraging.
In all, 40 per cent of the executives surveyed by Dun & Bradstreet ranked interest rates as the primary influence on their business, a rise of 14 per cent in two months and the highest figure recorded since May 2009.
The sales expectation index was down three points to an index of 31, but was still above those of the six years to the March quarter of 2010.
The inventories index was down three points to 10 but is at its second-highest level in seven years.
Employment expectations have risen one point to an index of nine, the highest figure recorded in seven years.
Fifteen per cent of executives surveyed expected to increase their staff in 2011, with 6 per cent expecting a reduction.
Dun & Bradstreet economic consultant Duncan Ironmonger said he expected solid growth across the wider economy in 2011.
“Although consumers are saving a higher proportion of disposable income, strong employment and income growth is continuing with only modest inflation,” Dr Ironmonger said.
“The Reserve Bank’s latest monetary policy meeting found there was a rebalancing of growth from public to private demand, an easing of availability of bank financing and a positive outlook for business investment.
“The D&B survey reveals that businesses are maintaining high expectations for growth in sales, profits and employment for the last quarter of 2010 and the first quarter of 2011.
