Low consumer spending hits retailers

The Australian Bureau of Statistics yesterday revealed the latest retail statistics for May, which did little to please investors. Despite seeing an increase of 0.1% in retail turnover for the month, compared to April’s 0.1% fall, a poorer than anticipated result saw a massive market sell-off.

The numbers reflect a poor consumer outlook and hint that confidence in the economy could be decreasing, particularly as the mining industry continues its slowdown. As the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) plummeted 1.86% yesterday, retail companies shares declined following the ABS’s release.

Specialty stores Myer (ASX: MYR) and David Jones (ASX: DJS) fell 2.9% and 1.94%, respectively, whilst Harvey Norman (ASX: HVN) also fell 2.86%. Along with the retailers themselves, property owners also felt the heat with shopping centre operator Westfield Group (ASX: WDC) falling 1.6%.

Whilst the data released by the ABS shows that consumers are currently not so willing to open their wallets, the news does not fare well for Westfield. Over the last 12 months, the company has been forced to cut their rent prices in order for specialty stores to be able to sustain payments. If consumers continue to lose their confidence in the market, then less spending will adversely affect Westfield in the long run.

The data showed increases in sales in department stores, food and other retailing as well as clothing, footwear and personal accessory retailing. These increases were largely offset by falls in cafes, restaurants and food services – which all contribute significantly to consumers attending shopping centres.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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