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Omicron Guts Retail Sector Gains of 2021

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The cash registers across Australia’s retail sector were overflowing in November as the nation notched up record sales to cap off a dire year, but the outlook is less bright for 2022.

Australian retail turnover increased 7.3 per cent in November 2021, according to Australian Bureau of Statistics data.

ABS director of quarterly economy side statistics Ben James said retail sales were at their highest in November, 5.8 per cent higher than the previous record, set in November 2020.

“Further easing of Covid restrictions in the south-eastern states and territories has seen the retail industry recover all lost momentum caused by the Delta outbreak,” James said.

“Victoria recorded the largest state rise, up 20 per cent, reaching its highest level of the series, following the state’s lockdown ending in late October.

“Continued easing of Covid-19 restrictions, including less strict density and capacity limits, in New South Wales (up 5.1 per cent) and the Australian Capital Territory (up 19.2 per cent) led to rises in turnover to record levels.”

In good news for big retailers, discretionary spending continued to be strong in November with five retail industries recording rises for the second consecutive month.

Pent-up consumer demand combined with an extended November sales period drove record sales in clothing, footwear and personal accessory retailing (up 38.2 per cent), household goods retailing (11.6 per cent), and department stores (26.0 per cent).

Food retailing was the only industry to fall, down 2.5 per cent, while cafes, restaurants, and takeaways rose 9.3 per cent as householders ventured out again.

But the near-term outlook might not be so rosy, according to CBA senior economist Belinda Allen, who said she expected December and January retail data would be affected due to household caution and labour shortages.

“We expect the data to shift to the downside in December and January in particular,” Allen said.

“Retail trade data for December should hold up, before the Omicron variant took charge through the eastern states.

“We expect January data to be more negatively impacted by this and compounded by staff shortages in many industries that are reducing supply of retail goods as well as services.”

The data also indicated consumers chose bricks and mortar shopping experiences over online retail, which dropped 8.7 per cent.

ANZ senior economist Adelaide Timbrell said observed spending showed “most of the post-Delta gains for retail spending reversed in January due to staff shortages, households in isolation and caution about going out in public”.

“But resilient consumer confidence regarding financial conditions points to potential for a quick bounce-back once health risks ease,” Timbrell said.

The ANZ-Roy Morgan consumer confidence index fell 2.2 per cent in the first week of January, reflecting the surge in Omicron variant cases, and the economic outlook reading fell to a three-month low.

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Article originally posted at: https://www.theurbandeveloper.com/articles/omicron-guts-retail-gains-of-2021