Retail spending is a little stronger than it was a year ago, but consumers are still cautious and are likely to remain that way for the near future.
Retail spending was up 0.2 per cent in April, seasonally adjusted, the Australian Bureau of Statistics said on Monday.
The figure was slightly below expectations and followed strong growth in spending in the first two months of 2013 and a slight fall in March.
JP Morgan economist Tom Kennedy said the rise was modest and he doesn’t expect the sector to rebound any time soon.
“The seven per cent decline in the Westpac-Melbourne Institute consumer confidence index throughout May suggests consumers are set to become increasingly cautious in their spending behaviour over the coming months,” he said.
“This view is largely supported from the business level, with the most recent NAB business confidence survey revealing that trading conditions, forward orders and overall confidence are still stuck in the doldrums.”
Mr Kennedy said department stores were the clear underperformer in April with a two per cent fall, showing that discretionary spending was weak.
At least a couple of the major retailers in their most recent quarterly sales reports have claimed warmer weather has slowed down sales of winter clothing.
Spending in clothing and footwear was up 1.8 per cent in March following a 4.3 per cent fall in April.
Australian National Retail Association chief executive Margy Osmond said cooler weather in April had boosted apparel sales figures.
“We’ve seen a fairly significant growth in clothing and accessories, which was all about those chilly mornings during the month of April when people decided it was time to go out and get a pair of boots or a new winter coat,” she said.
Ms Osmond said the Reserve Bank of Australia should cut the cash rate again to help boost consumer confidence.
The RBA reduced the rate in May by a quarter of a percentage point to a record low of 2.75 per cent.
“Another cut just might help aid this upward trend that retailers have been looking for,” she said.
Commonwealth Bank economist Gareth Aird said retail spending was a little bit below expectations but there were factors affecting the figures.
“What we’ve noticed in the retail space is there is a quite a lot of discounting,” he said.
“So the series we’re getting … is looking at the dollar amount not the volume of sales and because we’ve had discounting in household goods and department stores, that acts as a drag on total retail sales growth (in dollar terms).
“The conditions are in place for decent retail trade growth because we’ve got very low interest rates, which increases consumer spending power.”
However, Mr Aird said the fact that the Australian dollar has fallen and stayed below parity in May could mean an end to the discounts retailers were offering.
