MENU

Will retailers be hit as consumer confidence sinks?

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…

This little known ASX company has already delivered eight consecutive years of profit and dividend growth... but with even more growth ahead, the shares are still a firm "BUY" today! Discover The Motley Fool's #1 dividend pick in our newly updated report. Simply click here for your FREE copy right now.?

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

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.