Deloitte predicts uptick in retail sector, report reveals
Retailers can prepare for a “better year ahead” following the 2024 retail recession, according to the firm's most recent retail forecast.
Deloitte has forecasted a positive outlook for the retail sector in 2025 based on strong retail trade data in October and an improvement in consumer sentiment.
Following the retail recession in the middle of this year, the most recent edition of the Deloitte Access Economics’ Retail Forecasts highlighted an upward change in the retail landscape for 2025.
It was predicted by the firm that real retail turnover was expected to lift from -0.3 per cent in 2024 to 2.1 per cent in 2025 and 2.5 per cent in 2026, as consumers get their “spending groove back on.”
Deloitte partner and report author, David Rumbens, said the month of October saw nominal retail turnover lift by 0.6 per cent, with consumers making the most of earlier-than-usual holiday discounting.
“We’ve seen this in a much earlier uplift in searches for sales in Google trends data compared to 2023,” Rumbens said.
“This suggests that consumers are starting to shift from saving to spending, especially when there are good deals on offer, with the shift likely continuing into November off the back of saturated Black Friday campaigns last week.”
Deloitte indicated the data was a sign of hope after retailers had experienced two retail recessions in the past 18 months.
Despite a slight uptick in sales growth in the September quarter this year, it was only the second quarter of positive real growth in the last two years and real retail turnover was still 1.4 per cent lower in comparison to September 2022.
Rumbens said how much consumers would spend was always going to be uncertain.
“Part of the story has been an uptick in savings since tax cuts started making their way to consumers in July,” he said.
“National Accounts data released this week showed that household disposable income grew by 1.5 per cent over the September quarter, while household consumption was flat.”
“The household saving ratio ticked up from 2.4 per cent in June to 3.2 per cent in September as well. It was clear that consumers wanted to build back up their savings buffers and pay down mortgages before spending.”
The firm noted the rate cut from the RBA – yet to be determined – could act as a green light for consumers before they felt comfortable increasing their spending.
Despite positive sentiments, risks in the road ahead for the retail sector were also noted in the report, as uncertain timing and ‘discount dilemma’ would remain the crucial challenges for retailers.
The impacts of potential trade policy changes from a new administration in the US and the upcoming domestic federal election may also introduce some new bumps in 2025, Deloitte said.
Rumbens noted the risks should not overshadow the fact that consumer recovery was on the cards for 2025 and beyond.
“The tide is turning. The notable improvement in consumer sentiment in recent months and the extra dollars from tax cuts is starting to flow through to live retail data now.”
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