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Are retailers a sell due to the worst wages growth in 70 years?

Australian Bureau of Statistics, hourly pay rates excluding bonuses, as measured by Australia’s wage price index (WPI) rose by less than 2.1% in the year to March 2018, which is below levels last seen in previous recessions.

According to a report by Credit Suisse wage growth headwinds include:

  • Unemployment is above the 5% wages pressure point
  • Lower unionisation
  • Increased labour flexibility
  • Rising female participation
  • Ageing population

So, what does this mean for retailers? Not only do people have less money to spend, and vast amounts of debt, unless a retailer has a competing and functional online presence, they are also losing out to offshore and local retailers who have risen to the challenge.

Companies feeling the pressure have been JB Hi-Fi Limited (ASX: JBH), Harvey Norman Holdings Limited (ASX: HVN) and Myer Holdings Ltd (ASX: MYR).

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Motley Fool contributor Rosemary Steinfort owns shares of JB Hi-Fi Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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