Cost of living pressures have left retail sales in 2024 in their wake with spending contracting 0.4% over the March quarter, according to the latest report from Deloitte Access Economics.
A key driver has been the persistently high levels of price increases seen in essential spending outside of retail, namely rents, insurance and utilities, report author, David Rumbens said. “The year really began with a fizzle rather than a bang for most retailers.”
However, he said there is some optimism ahead as real wage growth, tax and eventually interest rate cuts will spur consumer spending later in 2024 and into 2025.
News was not so good on the household goods front that has gone from the best performing category to worst in just one quarter. Real turnover has fallen from 2.3% growth in December 2023 to a 2.9% reduction in March 2024.
Black Friday sales last year stoked sales across the category with prices falling 0.6% in the December quarter. But, without significant discounting and with many consumers having already purchased their big-ticket household items, consumers are not in the market for new household appliances.
Further indicators came from the latest Westpac’s Consumer Sentiment report that revealed the ‘time to buy a major item’ index has fallen back to extreme lows. While the NAB Consumer Sentiment survey reinforces this consumer behaviour, with spending intentions for major household items as the most conservative spending category. Also, data from Deloitte Consumer Signals showed that regardless of affluence, the majority of consumers don’t plan to spend any money on household goods over the coming months.
While cost-of-living pressures and a strong sales performance last quarter are the primary reasons of poor performance this quarter, housing activity also played into household goods spending. Due to a major backlog in housing construction, there is a limited availability of new housing stock, and combined with a tight rental market, people are choosing to stay in their current homes rather than moving, resulting in decreased demand for household appliances and furniture.
As the backlog of housing construction translates to new housing stock, this will most likely help boost sales volumes for household goods, however, this will take some time to occur.
“Broader consumer and housing conditions are expected to be more supportive in 2025 with sales for household goods expected to be 3.4% higher than 2024,” Rumbens said.
“Retailers should be expecting some lift in consumer spending this year, the key question will be when, and to what extent,” he said.