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Asia Pacific: Strong growth in food and grocery retail sector expected in Australia, finds index

Growth in retail trade is expected to soften in the lead up to Christmas, according to the Australian Food and Grocery Council (AFGC) CHEP Retail Index, which predicts year-on-year growth of 4.8% in the September quarter, slowing to 3.2% growth for the December quarter.

While the Index predicts growth will slow, retail trade turnover is still expected to increase modestly from AUD$23.26 billion (US$20.53 billion) in September to AUD$23.35 billion in November.

The AFGC CHEP Retail Index has shown strong year-on-year growth in 2014 to date, peaking in January at 5.7% and easing in more recent months.

This year’s warmer than usual winter has been blamed for weak clothing sales, as reflected in Australian Bureau of Statistics (ABS) data, which has indicated no growth in clothing retail over the last year.

By contrast, ABS figures show the food and household goods sectors recorded year-on-year sales growth of 5.5% to August 2014.

“Looking ahead to Christmas, the AFGC CHEP Retail Index indicates the trading year will finish weaker than it began, although traditionally the food and grocery sector is more buoyant at Christmas than other sectors,” says AFGC CEO Gary Dawson.

“Interest rates remain low but consumer sentiment hasn’t recovered significantly since the May Federal Budget.”

“Rising unemployment is also having a dampening effect on retail trade growth and a lift in the labor market is needed to underpin a stronger rate of income growth and therefore retail spending.”

The AFGC CHEP Retail Index is a collaborative project between the AFGC and CHEP Australia, powered by Deloitte.

It uses CHEP transactional data based on pallet movements and is a lead indicator of ABS Retail Trade data.