Australia: Retail Sales Experiences Steady Decline as Recession Looms

Australia: Retail Sales Experiences Steady Decline as Recession Looms

For retail traders in Australia, it is not business as usual as sales have seen a steady decline since June. This is coming amid the recent restrictions and lockdowns imposed by the government on several areas of the country. All these restrictions are just to prevent the spread of the deadly delta variant of the virus. While the strategies imposed are for the citizens’ benefit, business activities have been crippled and disrupted to a very large extent. It is even worse for retail traders as sales have dropped by 2.7% lower than the economists’ projections of 2.3%. 

Since the beginning of this year which has seen the retail market of the country losing level of sales, this is by far the weakest reading seen. Just last month, retail sales dropped greatly because of travel restrictions imposed on exit and entry. These travel regulations contributed to about 1.8% of the general sales loss.  Indeed, this is a frightening development that suggests a total economic recession if persistent. This is because the retail sector of Australia provides for about 18% of the country’s GDP, which implies that this sector’s performance would have a substantial effect on the economy in general. 

With the latest round of lockdowns, the country’s GDP is expected to go lower thus raising concerns about recession. The implementation of lockdown restrictions would also contribute to reducing retail sales more. This is because the consumption and purchase of retail commodities are reduced especially in households. Retail businesses are thus likely to suffer more than wholesale industries. Such development would in turn reflect on the country’s economy adversely. 

As the safety of her citizens is a priority, the Australian government intends to vaccinate at least 70% of the adult population before easing the lockdown restrictions. So the retail market would likely keep experiencing more losses and falls in sales level. However, experts are confident that economic activities can be revived again as domestic consumption can increase. There are also predictions that the imposition of restrictions might even contribute to the rebound of the retail sector. Although the prospects of this reality remain low, it can not be dismissed entirely. 

Retail Sales Fall And Impact on The Australian Dollar

The AUD is not doing too well against the USD as it took a dip earlier today. It continues to trade weakly just under the $0.73 point which is not very comforting. This fall could however be attributed to the Jackson Hole event slated for today. Presently, the currency is under pressure and would remain so unless the economic overview of Australia improves in the coming weeks. The economy’s challenges are hugely reflected in the currency’s performance thus responsible for the prolonged bearish movements experienced by the AUD. 

There is no doubt that the retail sector of Australia has been hugely affected by the pandemic even as recovery seems to be coming at a slow pace. Given the recent restrictions, one can only be hopeful that the predicted surge in retail purchases happens soon.