Retailers on road to recovery as consumer sentiment surges: ARA

Posted by Isobel Drake on 10th December 2008

Peak retail industry body the Australian Retailers Association (ARA) said the 7.5 per cent jump in December Westpac Consumer Sentiment figures released today was great news for retailers who expected strong growth to return to the sector by September in 2009.

According to ARA Executive Director, Richard Evans, the jump in consumer sentiment from 85.5 in November to 92 in December suggests consumers are finally realising the current economic crisis is a crisis of confidence.

“With petrol prices rapidly decreasing and interest rates at their lowest point since December 2003, consumers have cash in their pockets after some tough months earlier in the year. Until now, constant ‘doom and gloom’ rhetoric from analysts has resulted in consumer trepidation to responsibly spend the cash in their pockets,” Mr Evans suggested. “But this jump in consumer sentiment doesn’t just affect retailers, it affects all Australian businesses. Retailing is the barometer of the economy and conditions affecting the retail sector will affect the rest of the supply channel three to six months later.”

“Interest rate cuts in November and December will be seen in the retail market around May/June next year – with strong growth expected to return by September 2009. This means there may not be good news for other industries until December 2009/January 2010. But what we don’t want to see now is businesses prematurely cutting back on labour and laying off staff,” Mr Evans said. “The RBA has done its job by lowering interest rates; the Rudd Government has done its job with the $10.4 billion stimulus package and now it seems consumers are confident enough to do their job and inject funds back into the economy. Now it’s up to businesses to follow through with the economic recovery and concentrate on stabilising employment levels.”

“The easiest way for lazy managers in the supply channel to reduce expenditure during tough times is to cut back on employment,” Mr Evans noted. “But we’re all in this together and we’re asking employers to look carefully at their business paradigm and think about what is best for Australia’s economic recovery before they start cutting back on staff.”

The growth in confidence to a rating of 92 still means that more consumers are pessimistic than optimistic, but it does signal more positive news for food retailers and manufacturers as we head into the all important Christmas season.