ABS figures show slowdown in retail growth ahead of the budget

With the federal budget looming, retail sales have slowed down, up just 0.1% for March, driven mainly by household goods and food.

Figures published yesterday by the Australian Bureau of Statistics show overall sales are down by 0.2% from February, despite a 1% growth for household goods, a 0.5% growth for food, and a 1% growth for cafes, restaurants, and takeaways.

Department stores are down by 0.6% and clothing, footwear and personal accessory spending is down by 0.2%.

However, ANZ senior economist Felicity Emmett told SmartCompany while shrinking consumer confidence is a response to General Motors quitting Australia by 2017 and the uncertain future of Qantas, she expects to see spending rise further.

“I think the outlook is quite good for consumer spending. House prices are rising at a solid rate and that will help to support consumer spending going forward,” says Emmett.

National Retail Association chief executive Trevor Evans says while the federal budget may help consumer confidence if the government is seen as reining in debt, an overly harsh response risks destroying growth.

“We think it’ll be good for consumer confidence, economic growth and retail status if the government can be seen to be getting the budget problem under control,” Evans says.

“We’re worried if the budget response is too harsh, it might have the impact of shocking households and destroying the momentum,” he says.

But Evans sees the Australian expansion of Swedish furniture and home wares chain IKEA and US home wares giant Williams-Sonoma as an international vote of confidence in the retail sector.

IKEA plans to open four more stores by 2016 and launch an online store across 44 countries over the next two years. IKEA Australia currently has no online store.

Pottery Barn partner company Williams-Somona plans to launch eight more Australian stores over the next year.

“The Australian economy is clearly doing better and preforming better and there are many countries in the developed world with a waiting brief on Australia and [who] would be willing to take charge to enter the market here is conditions are right,” says Evans.

This article first appeared on SmartCompany.