Retail confronting headwinds

At least until second half.

After a tough end to 2018, retailers faced yet another period of weak demand and declining retail spending over the March quarter of 2019. However, it may not be all doom and gloom for the sector, with some very much needed relief expected in the second half of the year in the form of increased tax offsets.

According to Deloitte Access Economics’ latest quarterly Retail Forecasts subscriber report, retail turnover growth is expected to slow from 2.2 per cent in 2018 to just 1.5 per cent in 2019, before strengthening again in 2020 to 2.9 per cent.

But the outlook for 2019 is a tale of two halves, and there is some good news ahead,” Deloitte partner, David Rumbens said. “While the first half of the year is constrained by weak income growth, the latter half will likely receive a boost as monetary and fiscal stimulus work together for the first time in over a decade.

“The post-election sugar hit of tax offsets for low and middle earners is likely to boost household incomes in the second half of 2019. Usually tax cuts result in a marginally higher take home pay packet, supporting a gradual and ongoing increase in consumption. The difference this time around is that the tax policy changes will be putting cold hard cash in the hands of consumers once they have lodged their returns.”

Rumbens said that over half of all tax refunds are completed in the September quarter, and just under another 25 per cent in December that bodes well for a surge in spending in the September quarter and provide the stimulus retailers have been craving.

The struggling household goods sector, that has been taking a double hit from tepid wage growth and declining house prices, as well as increased competition from the rise of online spending, is expected to receive an immediate boost, as households spend the extra cash on big ticket items.

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