Food retailing makes waves but restaurant turnover declines

Posted by Isobel Drake on 8th January 2009

Peak retail industry body the Australian Retailers Association (ARA) has advised against an overreaction to the low 0.1 percent increase in November 2008 retail trade trends and remained optimistic growth would begin to return to the sector by April 2009, with significant recovery expected through the September 2009 quarter. The data beat expectations, with food retail again leading the way.

ARA Executive Director Richard Evans said retail trade growth for November (NSW – 0.2%, Vic 0.6%, Qld 0.1%, SA 0.1%, WA -0.1, Tas 0.2, NT 1.2, ACT 0.7) reflected the economic events and consumer sentiment from over one month ago during the peak of the crisis period and advised supply chain employers against knee-jerk reactions to employment levels.

“With the negative rhetoric surrounding the global financial crisis, retailers were expecting a more significant drop in retail trade growth for November after three months of a stagnant 0.2 percent growth from August to October,” Mr Evans advised. “Savvy employers, who have enjoyed a strong Christmas and who understand consumer sentiment has risen 7.5 points in the past month, won’t overreact to this outdated result. However, if employers do overreact and start cutting jobs now, the recovery will be much slower.”

Food retailing witnessed a strong 0.7% increase in the trend on turnover, the highest of all categories in the research. Cafés, restaurants and takeaway food services did not fare so well, however, with another decline (-0.3%). The discrepancy could indicate a slight shift toward more home cooked meals purchased from grocers instead of eating out. The 0.3% decline in the trend was below that of the previous month, though, when a fall of 0.6% was realised. For the year to November, turnover for the category was down 3.2%.

“… Our message is to stay calm. An increasing dollar value, reduced interest rates, the Rudd Government’s stimulus package and petrol prices at less than one dollar per litre all point to improving conditions,” Mr Evans added. “Once we start heading into June – August, with predicted further rate cuts on the horizon and potentially another cash bonus from the Rudd Government, strong consumer confidence will return with more cash flowing through the retail sector.”