Strong spending on cafe, restaurant and takeaway food is driving retail turnover growth, but food inflation and rising prices overall are clouding the figures.
Retail spending data from the Australian Bureau of Statistics released on Thursday showed a 0.7 per cent jump in turnover in May across as shoppers looked for bargains at mid-year sales.
Spending on food and eating out also helped lift May’s numbers, with cafes, restaurants and takeaway food services up 1.4 per cent to hit a record level of $5.4 billion for the month.
Industry experts were cautious about the numbers, however, observing that inflationary pressures and price increases were having an impact on monthly turnover figures for food and dining.
“It’s an essential item, we all have to eat… but there is no doubt that unavoidable price increases are having a part to play in that sector,” Australian Retailers Association chief executive Paul Zahra said.
Monthly consumer price index data released on Wednesday showed inflation had flattened slightly to an annual reading rise of 5.6 per cent in May, though food and non-alcoholic beverage prices had jumped by 7.9 per cent in the past 12 months.
Quick service food retail operators have been upbeat about trading conditions despite consumer spending concerns.
Shares in major local KFC franchisor Collins Foods have surged by close to 16 per cent so far this week, after the company reported a better-than-expected full-year financial result. Its network of more than 200 Australian KFC restaurants hit $1 billion in annual revenues for the first time.
Collins Foods boss Drew O’Malley said the business had been trying to minimise product price increases wherever possible to show diners that its restaurants remained good value.
“We think the decision not to seek a full offset to short-term cost pressures via menu pricing has been the right decision for the consumer,” he said.
Zahra said takeaway food options were well-placed as consumers “traded down” to more affordable eating-out options.
“In quick-service restaurants, what we are seeing is they are doing well [as] we are seeing consumers going down the price hierarchy,” he said.
But the retailers’ association is cautious about the spending outlook overall as sales continue to slow across household goods, clothing and in department stores.
Turnover among household goods retailers jumped by 0.7 per cent to $5.7 billion in May, but it’s down by 4.4 per cent since May 2022.
On Wednesday, electronics retailer Harvey Norman flagged a pre-tax profit slump of at least 25 per cent for the 2023 financial year, prompting retail analysts to warn the worst is yet to come.
Citi’s equities team said the outlook for further interest rate rises had worsened since the beginning of the year, making the spending outlook tougher.
“We expect conditions to worsen given the further roll-off of fixed rate mortgages and further interest rate hikes,” Citi said in a note to clients.
Source: Thanks smh.com