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Australian retailers are facing the fight of their life in 2020. Consumer confidence slumped for a period, job losses have soared, and spending behaviour has been tipped on its head. The easing of restrictions and large fiscal stimulus program provide some support, but retail is likely to face headwinds on the long recovery path ahead.
Retail spending is expected to fall a record-breaking 1.4% in 2020. After a surge in growth over the March quarter, June quarter sales are expected to fall 4.0% as the COVID-19 outbreak and associated restrictions limit spending. Indeed, retail spending slumped a whopping 17.7% in April, and while this was followed by an estimated 16.3% gain in May, the short-fall in spending is unlikely to be made up through the rest of the quarter.
But while the average is dire, there may not be many retailers performing at the average – many will fare much worse, while supermarkets, pharmacies and hardware, amongst others, have been experiencing a golden run.
Consumer willingness to spend will likely be buffeted by a number of different factors, meaning that one month’s trading experience may be a terrible guide to how the year as a whole pans out. Rather than one dominant economic theme, we expect six phases to retail spending in 2020.
Retail phases in 2020
There are a number of risks to the outlook. Short-term risks from rising unemployment and reduced willingness to spend will linger, especially as fiscal stimulus programs are unwound in September.
More worrying is the longer-term risk from weak population growth. Migration has been an important support for retail spending over the past decade, but with borders closed there is potential for this tailwind for growth to turn into a headwind.
David is a macro economist with extensive experience in applied economic and quantitative analysis of the Australian economy, along with considerable experience in labor market analysis. David is a regular commentator on macroeconomic trends, and prepares a weekly economic briefing newsletter.
Emily is an Associate Director within Deloitte Access Economics' macroeconomic team in Sydney. She has experience delivering economic analysis and commentary to a range of clients across the public and private sectors.