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Westfield faces flat consumer spending

According to figures released by the Australian Bureau of Statistics on Tuesday, retail sales remained flat in June, which marked the fourth consecutive month of sales weakness.

Changing political and taxation policies, deteriorating business conditions and a weaker Australian dollar (which is inflating the price of everyday products such as petrol) are all examples of factors playing on consumers’ minds, restricting the amount of money being spent in retail stores such as Harvey Norman (ASX: HVN), JB Hi-Fi (ASX: JBH) or Myer (ASX: MYR).

The pain being felt by retailers is exacerbated by their current struggles against the expanding sector of online retailing. Consumers are finding online shopping to be cheaper, more convenient and it offers a wider array of products.

However, whilst it is the retailers that will suffer in the short-term, shopping centre operators and property groups such as Westfield (ASX: WDC) or GPT Group (ASX: GPT) could feel the longer-lasting effects. Should retailers choose to reduce the number of physical stores in shopping centres to instead focus on expanding their online stores, these groups will be forced to lower rents to keep vacancy rates low. This would have a lasting effect on profitability.

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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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