Retail sales expected to pick up after horror year: Access Economics

Retail sales are expected to grow by just 1.3% for the year to June 30, the worst annual result in two decades, but Deloitte Access Economics says there is light at the end of the tunnel.

Its retail forecasts for May show Deloitte Access Economics expects jobs growth, wage gains and a levelling out of household savings to drive retail growth in the years ahead. It tips sales growth to increase by 2.2% in the 2012 fiscal year, and 3.3% the year after.

“We think retail sales will pick up,” Deloitte Access Economics partner David Rumbens told SmartCompany this morning.

“The view is the Australian economy will rebound strongly after a dip in the March quarter. We’re getting very high prices for our exports and there is some good support there for economic growth going forward so it’s not just confined to the resources sector.”

Rumbens adds that the 2011 fiscal-year growth of just 1.3% was worse than he had expected, and driven by slow jobs growth over the past five months, falling prices and the summer’s natural disasters.

“We did think it would be a tough period, but it has been tougher than we thought,” Rumbens says.

“It’s not due to lack of income growth. People are more cautious and saving more. The high Aussie dollar also hasn’t really generated an increase in spending.”

Tasmania was hit hardest, with its sales growth declining by almost 4% over the year. Western Australia recorded the biggest sales growth of about 3.5% while the other states and territories recorded only modest retail sales growth.

The national clothing sector was hit particularly hard. The report stated clothing was in strife, with lower prices doing nothing to help sales. Volumes of sales from clothing retailers went up just 0.3% in the last year.

Rumbens forecasts more Australian retailers to start forming an online presence.

“Consumers are buying more online and sourcing information online before purchasing,” he says.

“A lot of Australian retailers have bitten the bullet and now do online sales. In a way they’ve been forced by foreign competition and we expect more to follow.”

And while the Reserve Bank kept rates steady yesterday, Rumbens says the sector can expect a lift in the official rate within months.

“We are factoring in further interest rate rises throughout the course of this year. We predict it will have a dampening effect along with increased house prices.”

One retailer hoping to capitalise on the upturn in sales growth is Zara. The Spanish retailer is opening its first Melbourne store in Bourke Street Mall next week, with about 130 staff on its roster.