Will retailers be hit as consumer confidence sinks?

RBA may also be forced to cut rates

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

News that consumer confidence has fallen to its lowest level since 2009 has put another rate cut back on the RBA’s board table.

According to ANZ-Roy Morgan’s weekly survey, consumer confidence fell 1.1% in the past week, adding up to a 15% decline over the past five weeks. Much of the fall appears to be due to the Federal Budget ‘austerity’ measures, with many households and consumers under the impression (rightly or wrongly) that the budget is aimed squarely at their hip pockets.

And they may well be right, with another survey showing that consumer financial stress is rising rapidly.

Dun and Bradstreet’s quarterly Consumer Financial Stress Index shows that stress levels have risen by 43% from 13 in September last year to 18.7 currently. The index is forecast to rise to 24.7 points by July, its second-highest on record, as households struggle with debt repayments.

And while the Reserve Bank of Australia (RBA) has forecast an extended period of stable interest rates, the central bank may be forced to act sooner, rather than later.

The bad news could see consumers tighten their purse strings, plunging Australia’s retail sector back into the doldrums, and affecting everyone from department store retailers David Jones Limited (ASX: DJS) and Myer Holdings Ltd (ASX: MYR) to clothing and electrical retailers like Kathmandu Holdings Ltd (ASX: KMD) and Dick Smith Holdings Ltd (ASX: DSH).

One retailer that may benefit is Reject Shop Ltd (ASX: TRS), with its ‘cheap and cheerful’ products.

Of course the RBA faces a dilemma in that any more rate cuts could see property prices spike even further – and it would definitely be bad news for term deposit holders. Another reason why investors should consider high-yielding companies – such as this one…

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »