Retail sector still suffering chilly winds
Year on year, it has been the same story with household savings rising, the higher dollar making overseas travel more attractive and the erosion in apparel sales from the internet.
The latest Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (PCI) released on Friday showed the national construction industry continued to contract in June - albeit at a slower pace.
The Australian PCI has now been contracting for 34 consecutive months. The survey found that the new orders sub-index remained unchanged at 34.8, although new orders declined at a slower pace in the house building, apartments and commercial construction sectors. Meanwhile retail sales at shopping centres and suburban strips have also suffered. Retail experts say it's been a combination of the warm lead-up to winter, the heaving and constant discounting across all sectors and, to a lesser extent, the uncertainty emanating out of Canberra with the pending federal election.
The two largest states, NSW and Victoria, both recorded a fall in retail trade over May. Sales were down by 0.4 per cent in NSW and 0.3 per cent in Victoria.
The saviour has been food and what economists label food catering, or takeaway meals and cheap and cheerful restaurants. Retail trade rose by 0.1 per cent in May after falling by 0.1 per cent in April and falling by 0.6 per cent in March. Annual spending growth fell to 2.3 per cent - the weakest annual growth rate in 15 months.
In the latest Australian Bureau of Statistics, it shows that non-food retailing rose by 0.1 per cent in May after rising by 0.2 per cent in April. Sales by chain-store retailers and other large retailers rose 0.3 per cent in May.
Frequently Asked Questions about this Article…
The retail sector has been through one of its toughest 12 months, with sales struggling even after interest rate cuts and steady employment. Retail trade rose only 0.1% in May (after -0.1% in April and -0.6% in March) and annual spending growth fell to 2.3% — the weakest 12‑month growth rate in 15 months.
According to the article, weaker retail sales are linked to rising household savings, a stronger Australian dollar that makes overseas travel more attractive, erosion of apparel sales from online competition, a warm lead-up to winter, widespread and persistent discounting across sectors, and some uncertainty tied to the pending federal election.
The Australian Industry Group/Housing Industry Association Performance of Construction Index (PCI) shows the national construction industry continued to contract in June, though at a slower pace. The PCI has been contracting for 34 consecutive months and the new orders sub‑index remained unchanged at 34.8, indicating ongoing weakness in new construction demand.
A new orders sub‑index of 34.8 (well below the 50‑point expansion/contraction threshold) indicates that new orders for construction are still declining. The article notes new orders declined at a slower pace in house building, apartments and commercial construction, but overall activity remains in contraction.
Food-related categories have been the main support for retail: food retailing and 'food catering' — takeaway meals and lower‑cost restaurants — helped lift overall retail trade, offsetting weakness elsewhere in non‑food categories.
The two largest states recorded falls in May: retail sales were down 0.4% in New South Wales and down 0.3% in Victoria, reflecting weaker demand in shopping centres and suburban strips in those states.
Investors should monitor the ABS retail sales releases (monthly retail trade and category breakdowns), the Australian Industry Group/HIA PCI (including the new orders sub‑index), household savings trends, exchange rate movements (the higher dollar), and indicators of discounting or foot traffic — all of which the article highlights as drivers of retail and construction performance.
Non‑food retailing showed a small increase of 0.1% in May (after 0.2% in April). Sales by chain‑store and other large retailers rose 0.3% in May, suggesting large-format retailers saw slightly better outcomes than some other retail segments.
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