Experts warn that retail in Australia is currently facing a recession.

According to experts, Australia's retail sector has been facing a challenging time for almost two years now. It seems that Aussies are cutting down on their shopping trips, causing a decline in retail spending. Deloitte Access Economics partner Dave Rumbens expressed concerns about this trend, predicting a grim Christmas shopping season.

Rumbens pointed out that the evidence suggests that the retail sector has effectively been in a recession for the past 18 months. It's not surprising that there's a sequel to this retail recession, as in six out of the last seven quarters, there has been a decline in real retail spending. To make matters worse, when looking at the numbers on a per capita basis, the situation appears even more dire.

Real per capita retail spending has been decreasing for eight consecutive quarters now, with a significant drop of 2.5% from June 2023 and a staggering 6.3% from June 2022. These figures are a cause for concern, as they come at a time when the monthly inflation rate has also decreased to 3.5%, down from 3.8% in June.

One of the main reasons behind this decline in retail spending is the tightening of household budgets due to rising mortgage rates and cost-of-living pressures. Rumbens warned that the next few months would be challenging for retailers, but perhaps not as much of a struggle as it has been so far.

He compared the current situation to a horror sequel, where the characters are more prepared, and the plot is more predictable. However, this doesn't change the fact that real per capita retail spending has been decreasing for eight consecutive quarters, with a drop of 2.5% from June 2023 and a staggering 6.3% from June 2022.

Deloitte's analysis also showed that this decline in retail spending is happening against a backdrop of poor economic conditions, with a weakening labor market and an increase in business insolvencies. Rumbens highlighted that while the figures are concerning, the most alarming aspect is that one-third of consumer spending, which goes to retailers, is experiencing negative growth of 0.6% in real spending over the year to June.

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