High street sales up in Australia
The Australian retail sector continued to grow in February, although the sluggish global economy and increased competition from internet merchants suggest 2012 could be another tough one for local companies.
Recent data from the Australian Bureau of Statistics suggest retail sales grew 0.2 percent in February, following a 0.3 percent increase in January. Seasonally adjusted, approximately $20.98 billion was spent on retail, compared to the $20.95 billion the previous month. The slight rise in sales in February was on par with what many economists predicted.
"This was in line with expectations," Macquarie senior economist Brian Redican told the Sydney Morning Herald. "There was no sign of any improvement on February … It looks like another tough start to the year for the retail sector."
A number of forces have impacted the local retail sector. Falling consumer confidence has forced many Australians to be more cost-conscious and peel back on spending. The general economic conditions haven't helped the matter, with many households being forced to spend more money on basic commodities rather than retail goods. Finally, many Australians have begun shopping online and importing retail purchases from foreign retailers, rather than supporting local merchants.
Some big names in the Australian retail sector, such as David Jones, have been hit hard by these changes. Last month, David Jones noted first-half profits declined 19.6 percent from the previous year to $85 million. The company specifically pointed to online shopping and importation of goods as contributing factors and warned investors that full-year profits could take a 40 percent hit as the company reacts to these changes.
The retail sector performed better in some regions of Australia than others. In Queensland, for example, retail sales were up 1.5 percent and in Western Australia, they increased 1 percent. Conversely, sales were down 0.6 percent in New South Wales and 0.4 percent in Victoria, the ABS data revealed.
"Global ructions driving heightened caution coupled with the strong Aussie encouraging purchases abroad will keep retail sales soft," Moody's Economy.com analyst Katrina Ell added.
In addition to altering store operations, many Australian retailers are rallying behind legislation that would lower the importation threshold. Because consumers don't have to pay taxes on imported goods worth less than $1,000, many simply buy low-cost products abroad and then import them rather than paying higher domestic prices.
