With the world entering gift-giving season, retailers have seen a slight lift in consumer spending. In particular, discretionary retailers have seen more consumers shifting to value-for-money purchases during sales events such as the recent Black Friday. Black Friday, a sales event that started off as an American shopping tradition, has become a retail highlight around the world. Data from the Australian Retailers Association (ARA) shows that Black Friday sales are to account for more than a quarter of 2023 holiday purchases. This lends itself to a forecast of $6.36 billion dollars worth of transactions over the Black Friday period, a 3 per cent increase from last year.
Although this provided retailers with a much-needed boost, this temporary hike in spending is only a record because of tight household budgets. Hence, with the cost-of-living crisis continuing to put pressure on household consumption, slow downs in discretionary spending still remain. In fact, last year Australia spent on average, $700 per person on gifting, and this year it is forecasted to be $648. Consumers are also feeling “deeply” pessimistic, with consumer sentiment falling 2.6 per cent to 79.9 points in November. With the score below 100, this pessimism is akin to the levels seen during the COVID-19 pandemic and the 2008 Global Financial Crisis.
Accordingly, it becomes clear that January will be a real challenge for retailers, and the economy as a whole, as consumers continue to worry about interest rate rises. Over 70 per cent of households expect interest rates to rise further over the next 12 months, which is up from just over 60 percent one month ago. Although this austerity may slightly dampen inflation, the RBA believes that the inflation will recover at the end of 2025 - if all goes according to plan.
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