RETAIL MOMENTUM COULD HIT THE WALL IN 2016

Written on the 8 March 2016

RETAIL MOMENTUM COULD HIT THE WALL IN 2016

AUSTRALIAN retail had a healthy 2015, but experts say this upward trend might hit a wall in 2016.

A market forecast conducted by Deloitte spells the end of retail growth nationally as the Aussie market is battered by a number of national and international economic factors.

Despite an underperforming Australian economy in 2015, retail performed surprisingly well, hitting 3.3 per cent growth by the end of the year.

Deloitte's David Rumbens says a turbulent global backdrop could mean Australian retail growth will drop to 2.3 per cent by the end of 2017.

"Global developments are posing a competitive challenge for Australian retailers," says Rumbens.

"Front and centre is slowing growth in China, which has taken a heavy toll on commodity process, and the end result is that Australia's national income growth will remain weak.

"That is bad news for retailers, and the risks of a hard-landing in China are also real which would be even worse news if it eventuated."

The drop in the price of oil is also hurting the market, given Australia's rising LNG exports. Whilst this might give the typical consumer more cash in their pocket, it is also hurting the costs of imports.

Uncertain offshore investment is also posing an issue for the certainty of household wealth and house prices, says Rumbens.

"If foreign investor capital retreats from Australia, that may put pressure on house prices and, indirectly, on retail."

Rumbens attributes the sustained growth of retail so far to strong growth in employment and consumer confidence, but questions whether these healthy numbers will last.

NSW, Victoria, South Australia, Tasmania and ACT performed strongly in 2015, but Rumbens is unsure as to whether they will deliver again this year.

"The south-east may slow through the course of the year ahead as housing markets in Sydney and Melbourne start to cool," says Rumbens.

The underperforming northern states suffered as a result of the downturn in mining investment, and this will likely impede on their success again in 2015.

However, Rumbens is optimistic for the future of retail in the north.

"This state of affairs won't be permanent," says Rumbens. "A narrowing in growth differentials is likely over time."

 


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