Research paints bleak picture for Christmas retail

Weak wages growth, negative consumer confidence and changes to purchasing habits prompt Christmas retail caution.

Shoppers in Sydney. Picture: AAP

Negative consumer confidence and changing purchasing habits are tipped to hit an already struggling retail sector in the lead up to Christmas.

Industry researcher IBISWorld is forecasting retail spending over the Christmas period to grow by just 1.7 per cent in 2019 compared to the previous year.

It says rising costs of living and declining household discretionary income are likely to have an impact on consumer sentiment, prompting shoppers to seek out heavy discounts in pre-Christmas sales.

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Consumer goods retailing is likely to grow 1.4 per cent over the December period.

In contrast to the predicted Christmas figures, November’s Black Friday and Cyber Monday online sales figures grew by 28.7 per cent, IBISWorld said.

Senior industry analyst Tom Youl said weak wage growth has “severely limited” discretionary spending and is likely to hurt consumer sentiment.

The research company is expecting consumer sentiment to fall by 4.6 per cent in the 2019-20 financial year. Household discretionary income is predicted to fall by 0.7 per cent.

“Weak wage growth has severely limited households’ ability to spend on discretionary items over the past five years,” Mr Youl said.

“Although multiple reductions in the cash rate and federal tax cuts aimed to boost consumer expenditure, most households are using these extra funds to pay off debt or increase savings.

“The interest rate cuts may have alarmed consumers, prompting a fall in consumer confidence and further depressed retail expenditure.”