It could be another tough Christmas for Australian retailers

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It has been a tough year for Australian retailers — even without the launch of Amazon — and the trend looks like it could continue into the key Christmas trading period.

According to research from Westpac, a larger proportion of Australians intend to spend less this festive season, driven by intensifying pressures on household finances.

“The picture from November’s Westpac-Melbourne Institute Consumer Sentiment survey is one of income pressures, nervousness about the year ahead and consumers looking to keep Christmas spending on a tight rein,” says Matthew Hassan, Senior Economist at Westopac.

“A repeat of 2016’s ‘tepid’ Christmas spend looks likely.”

This chart from Westpac shows the evolution in expected Christmas season spend going back to 2013.

Source: Westpac

A reading of 100 indicates that an equal number of people expect to increase and decrease spending levels over Christmas. Anything below 100 indicates that more people intend to spend less than they did a year earlier.

While that’s always been the case in the post-GFC era, Hassan says that at 78.0, this year’s reading points to the likelihood that actual spending levels will be flat this year in nominal terms.

“Overall, the 78 reading is broadly consistent with flat per capita growth in retail sales,” he says.

“Allowing for population gains, that points to aggregate retail sales growth of around 1.6% year-on-year, in line with the current subdued pace and down on the 2% gain in 2016.”

According to the ABS, retail sales grew by 1.4% in the year to September, the weakest increase in dollar terms in over four years.

Sales fell in both July and August, and came in flat in September, marking in the weakest quarterly decline in over seven years.

According to the National Australia Bank’s Cashless Retail Sales Index — an alternate indicator on retail spending — that weakness likely continued into October.

Despite persistent weakness in spending, retailers appear to be banking on a big Christmas trading period with job advertisements for casual and temp staff over the Christmas and Boxing Day period increasing noticeably compared to a year ago, according to jobsite Indeed.

“Leading into Christmas, [we’re] seeing strong demand for retail positions, with Christmas job postings tracking almost 20% higher than last year,” said Callam Pickering, APAC Economist at Indeed.

“Despite subdued retail spending, it appears that retailers are gearing up for a big Christmas spend.”

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