The days of toilet paper hoarding are officially over.
But according to new analysis from ANZ bank, unprecedented levels of supermarket spending have covered up catastrophic falls in non-essential areas like fashion and food retail.
The insights released on Wednesday revealed household spending has entered a ‘new normal’, as Australians hunker down for an indefinite lockdown.
And it presents a particularly grim outlook for retail.
As the chart below shows, Australian retail spending dipped into negative year-on-year growth last week for the first time this year.
Although purchases of groceries and other essentials, which a few weeks ago were 80 per cent above last year’s figures, has stabilised at 15 per cent year-on-year growth, they are no longer offsetting declines in social spending.
The fashion sector has weathered a particularly brutal storm with sales down 70 per cent on last year as consumers avoid shopping centres.
Spending linked to socialising and public gatherings – including dining out (52 cents for every dollar spent last year) – descended to new yearly lows.
And the rush to stock up on home office supplies, new entertainment products (except consumer electronics) and gym equipment has stabilised to usual levels.
ANZ Research economist Adelaide Timbrell told The New Daily growth in overall consumer spending is expected to dip further below zero as the impacts of rising unemployment and other financial constraints weigh down the economy.
“The transition to lockdown really hid the weakness in the economy from a consumer spending perspective, because people were stockpiling and moving purchasing forward,” Ms Timbrell said.
“We’re soon going to be seeing the other side of that coin, where people already bought up on all the essentials, and now won’t have the means nor the motivation to keep spending.”
What lies ahead for Australian retail?
As consumer confidence descends to levels not witnessed since the onset of Australia’s 1990s recession, the retail sector is bracing for a long-winded dry spell.
Based on current projections of the pandemic’s course, ANZ Research predicts economic activity and consumer spending will remain below 2019 levels even in the final quarter of 2021.
And the International Monetary Fund expects Australia’s economic pain to last at least two years, with unemployment expected to average 7.6 per cent in 2020 and 8.9 per cent in 2021.
EY Oceania chief economist Jo Masters said previous headwinds that battered the sector have been compounded by the various economic “shocks” of this public health crisis.
“There was already plenty of competition from online and foreign retailers and we saw households reduce discretionary spending to reflect higher debt levels,” Ms Masters told The New Daily.
“While there will still be ongoing demand for goods, what and how we buy might change, and we should expect to see more cautionary spending behaviour in the future.”
Australian retail now entering ‘uncharted waters’
Ms Timbrell said retail’s road to recovery following this “once-in-a-lifetime event” will not prove simple, once containment measures have eased.
With households baking in conservative spending habits during the lockdown, previous assumptions about consumer trends could be “permanently changed”.
“Anyone who had that reduced income [during the pandemic] will still be recovering once restrictions are lifted, even if their income returns to normal,” Ms Timbrell said.
“Families may just feel a bit more risk-averse because they’ve now seen how quickly circumstances can change – the longer-term effects really are in uncharted waters.”
Meanwhile, Ms Masters said there’s no blueprint for retail’s recovery as the challenges it faces are not purely financial.
“This is unlike the GFC or the dot-com bust, and this is not a crisis that’s feeding through to the real economy,” Ms Masters said.
“This is effectively a health crisis that’s feeding through to a social and economic crisis – and as a result of that, demand, supply and liquidity have all taken major hits.”