Index Predicts Christmas Spending Slow Down

October 29, 2012

The outlook for Christmas retail trade in Australia appears modest, with the AFGC CHEP Retail Index predicting year-on-year growth of 2.9 per cent for the December quarter, below the 10-year average of 5 per cent and softer than year-on-year growth in the September quarter of 3.7 per cent.

The AFGC CHEP Retail Index is a strong predictor of trend growth in nominal retail spending and provides a unique insight into the performance of the Australian retail market.

While retail trade turnover will experience a slight contraction in from $21.56 billion in September to $21.52 billion in November, lower interest rates may help to provide support to retail spending.

Australian Food & Grocery Council CEO Gary Dawson said, "The Reserve Bank's decision to cut interest rates over the last six months has helped boost retail trade conditions, but overall the broader economic backdrop is creating a soft retail environment heading into Christmas. We're hoping that another cut in interest rates will send the right signals to households so they embrace this summer season with more optimism.

"Food manufacturers are facing an environment where sluggish retail conditions, rising input costs on everything from commodities to labour to energy and retail price deflation continues to cut margins, placing the sector under increasing pressure.

"Despite the challenges, the food and grocery manufacturing sector is still optimistic that it is well-positioned to improve its competitiveness through seeking efficiencies across the entire supply chain by improving processes and practices, and increasing investment in research and development and innovation."

CHEP Australia & New Zealand President Phillip Austin said, "Over the past 12 months AFGC CHEP Retail Index predictions for year-on-year movement and retail trade turnover have been directionally very accurate. Growth, albeit modest, offers encouragement for businesses in the retail supply chain heading into the busiest retail period of the year. Further, the prospect of improved summer conditions may offer stronger growth prospects in traditional seasonal categories. CHEP will be working with its customers to ensure their products get to market with maximum efficiency and are on shelf when and where they are needed."

The AFGC CHEP Retail Index is a collaborative project between the AFGC and CHEP Australia, powered by Deloitte. It uses CHEP transactional data based on pallet movements and is a lead indicator of ABS Retail Trade data.

The next AFGC CHEP Retail Index will be released in late January 2013.