Covid-stricken Victoria dents retail sales figures, but experts expect consumers will keep spending

Victoria’s latest outbreak dented national retail sales figures, but experts say Aussies will continue their pandemic spendathon.

Recent snap lockdowns have dented Australia’s national retail trading figures, but experts say the outlook is bright for the sector for reasons including excess household savings.

New data from the Australian Bureau of Statistics shows retail turnover inched just 0.1 per cent higher nationally in May, with Victoria’s lockdown holding back sales growth.

Despite the shutdown only occurring for the last four days of the month, the state’s retail trading fell 1.5 per cent, with 1.5 per cent rises in both Queensland and Western Australia the main driver for the economic indicator not falling into negative territory.

“There were mixed results across the industries and states and territories, with Covid-19 restrictions in Victoria impacting the May result,” ABS director Ben James said.

On a national level, food retailing led the rise, offsetting falls in household goods spending and clothing retailing.

Australian Retailers Association chief executive Paul Zahra said CBD and travel businesses were still suffering from the financial impacts of virus lockdowns.

“Every lockdown comes at a significant cost and there is now no (JobKeeper) safety net for retailers,” Mr Zahra said.

The consumer spending outlook remains positive due to elevated confidence, the strong labour market recovery and excess household savings, CommSec says. Picture: Gaye Gerard / NCA NewsWire

“Consumer confidence faded in response to the most recent lockdown in Victoria and there are still restrictions in place limiting businesses from trading at their full potential – in particular cafes and hospitality businesses.”

Compared with May last year, when the first wave of the pandemic was hitting hard, retail trading was up 7.4 per cent.

Overall, retail turnover at $31.07bn in May was just 1.6 per cent below November’s record high, CommSec senior economist Ryan Felsman noted.

“The outlook for consumer spending remains positive due to elevated confidence, the strong labour market recovery, rising asset prices, border closures and excess household savings,” Mr Felsman said.

“A rotation from goods to services spending is expected to continue, but will be further hindered by virus flare-ups in Sydney and Melbourne in June.”

Analysis by Citi’s Bryan Raymond and James Wang suggests the long-term outlook for housing-related retailers and supermarkets is particularly bright.

Citi analysts expect grocery sales will remain strong, given elevated at-home food consumption.

They estimate the average Australian employee increased their time working from home from 0.6 days per week pre-Covid to one day per week in May, while 23 per cent of Australians continue to work from their dwelling either most or all days each week.

“Investment in home offices by households is expected to continue,” they wrote in a research note published on Monday.

“While there was a surge in electronics and furniture spending in the early stages of Covid, this spend is far from complete in our view.”

Households were constrained during their initial investment in these products due to uncertainty around how long WFH arrangements would last, concerns over job security and a relative lack of availability and affordability of home office equipment.

But 15 months after the initial outbreak, spending remains elevated, as consumers add to or upgrade their initial home office furniture and equipment.

The Citi analysts expect grocery sales will remain strong given elevated at-home food consumption while online shopping will increase as more WFH days will likely facilitate greater flexibility in receiving deliveries.