NAB business survey shows worrying downtrend in retail industry conditions

Australia’s retail sector employs more people than any other industry.

Look how retailers are reporting industry conditions (represented by the blue line in the chart):

Source: NAB

The chart’s from today’s NAB survey, the benchmark report on business activity and sentiment in the Australian economy.

The pressures on Australian retailers are well known. Low levels of inflation and wages growth have been a drag on pricing power and performance. The steady arrival of foreign entrants to the market such as Aldi in supermarkets and H&M in fashion have forced local companies to cut costs and margins in order to stay competitive. And consumer behaviour has been shifting steadily towards digital channels where the competition for dollars is fierce and run on much smaller cost bases.

The NAB business survey’s data shows conditions for this vast component of the Australian labour market have been steadily deteriorating for more than a year.

It’s not a disaster everywhere. Some retailers are doing quite well – for example, Deutsche Bank expects Harvey Norman and JB Hi-Fi to report strong results on the back of Christmas trade.

With well over a million people employed in Australian retail, a continuation of this trend cannot be helpful for the fragile labour market.

NOW READ: Australian business conditions surged in December, but don’t crack the champagne yet >>

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