AFGC forecasts sluggish retail sales for winter

Posted by AFN Staff Writers on 1st May 2012

Retail spending is expected to be moderate over the next quarter, following a sluggish start to 2012, putting pressure on Australian retailers and manufacturers, according to the Australian Food and Grocery Council (AFGC)’s latest CHEP Retail Index, just released.

The quarterly AFGC CHEP Retail Index, a forward looking indicator, draws on physical and product movements throughout Australian supply chains, analysed by Deloitte Analytics.

The latest Retail Index has forecast a 2.1 per cent rise in retail spending for the June quarter 2012, compared to growth of 2.5 per cent in the March 2012 quarter.

According to the AFGC, the predicted slowdown in retail activity through the June quarter will put further pressure on the profitability of Australia’s leading retailers and manufacturers.

The forecast also suggests that 2011 interest rate cuts by the Reserve Bank of Australia are yet to stimulate retail activity.

Key financial points for the March quarter include:

In trend terms, nominal retail spending growth fell to 2.5 per cent over the year to February 2012 – the lowest growth since September 2011, and well below the average growth over the last decade of more than 5.2 per cent.

Australia’s elevated exchange rate continues to present difficulties for retailers, with consumers increasingly purchasing goods online from overseas. A higher Australian Dollar does, however, assist local retailers with cheaper prices for imported stock.

At the State level, data from the Australian Bureau of Statistics shows that nominal retail spending growth in trend terms is reflecting Australia’s two-speed economy. In year on year terms, nominal retail spending in Western Australia is growing at close to 10 per cent, while in Queensland and the Northern Territory growth is close to four per cent. In contrast, year on year growth is less than one per cent in New South Wales, South Australia and the Australian Capital Territory, and around two per cent in Victoria.

President of CHEP Australia and New Zealand, Phillip Austin said, “Beyond the cooler summer’s impact on the traditional seasonal peak in supply chain activity, we are seeing highly efficient current stock holdings across both wholesalers and retailers, which implies businesses along the whole supply chain will see a rise in activity as demand returns.”

The AFGC’s CHEP Retail Index is a collaborative project between the AFGC and CHEP Australia, powered by Deloitte. It uses CHEP transactional data based on pallet movements and is a lead indicator of ABS Retail Trade data.