Retail sales set to pick up in 2011

Retailers selling household goods can expect the highest increase in sales volumes in 2011 as a result of unprecedented jobs growth, according to a new report.

The Access Economics report shows household goods will enjoy soaring sales, from 4.1% in 2010 to 5.8% in 2011-12. The non-food retail sector is also expected to do well, growing from 3.5% to 3.9%.

Access Economics director David Rumbens says retailers taking advantage of low importing costs will benefit in 2011-12.

“I think the higher dollar will favour those who have a high importing component, so you’re looking at a lot of clothing and household goods stores… [and] furniture and so on will come alongside that,” he says.

According to the report, overall retail sales will grow from 3.2% in 2010-11 to 4.1% in 2011-12. However, the report says retail spending will remain weak throughout the first few months of 2011.

Christmas spending this year is also expected to remain low as shoppers choose to save rather than spend, with Rumbens predicting sales to be around 3% – a sharp fall from the 6% retailers normally hope for.

According to Rumbens, the key factor driving retail in 2011 will be jobs growth; rising confidence and wage pressure should keep discretionary retail spending high.

“If you look at the jobs data, we added another 50,000 jobs in November. And jobs growth apart from that is at 3.5% a year.” Rumbens says.

“That’s a phenomenal support for income growth, and at the same time we also have wages growth lifting. It’s the underlying confidence that will affect sales.”

Rumbens says a gap between interest rate rises and higher wages should push discretionary spending upwards.

“It’s not happening yet because of these interest rate rises taking out the disposable income. And partly spending has been put into other areas like utility bills, and people are saving more. But as jobs growth increases, people will be more willing to spend,” he says.

According to the report, retail growth over the past year was led by Victoria, NSW and the Northern Territory, while jobs growth is most prevalent in resource-rich states Western Australia and Queensland.