Slow first quarter for retail

Retail trade activity in Australia is likely to flatten in the first quarter of the 2012 financial year, according to the second edition of the AFGC CHEP Retail Index released.

The AFGC CHEP Retail Index forecasts 1.5% growth in retail trade year on year for the quarter ending 30 September 2011. The June result showed a 3.2% increase year on year, while the Index showed retail activity slowing for August 2011 with a 1.9% increase year on year.

This unique Index, drawing on physical and product movements throughout Australian supply chains, provides a new and early indication of economic activity, as well as insight into historical trends and a forecast for the next quarter.

Australian Food and Grocery Council (AFGC) Chief Executive Kate Carnell said the latest AFGC CHEP Retail Index result reflected weaker consumer sentiment, and the increase in the number of Australians using the high Australian dollar to purchase online from offshore suppliers.

“Households’ confidence is falling as families cut back on spending to deal with higher costs of living and potential uncertainty around increased costs from the Federal Government’s proposed carbon tax and possible interest rate rises,” Ms Carnell said.

“A fall in retail spending translates to less movements through Australia’s long supply chain, impacting upon the food and grocery manufacturing sector, which is already under pressure from a ‘perfect storm’, such as rising input costs from wages, water and energy power prices, higher transport costs, including fuel and near record high global commodity prices.”

The AFGC CHEP Retail Index forecast for May 2011 was 2.5%, compared with the actual Australian Bureau of Statistics (ABS) result for May of 2.4%, released in July 2011.

CHEP Australia General Manager Phillip Austin said the data the company contributed to the AFGC CHEP Retail Index highlighted how CHEP’s unique position in the Australian supply chain could unlock value for its customers.

“What is unique about the Index is that it provides a forecast for the quarter ahead. CHEP’s deep understanding of supply chain activity allows us to find ways to collaborate with customers and industry to unlock value,” Mr Austin said.

The AFGC, CHEP and Deloitte developed the Index using extensive analytical modelling of more than 10 million data points based on CHEP pallet movements, historical ABS data and other data sources.

This methodology has been tested by Deloitte over the past two years and the results then subjected to a retrospective review over the last seven years, indicating that the model is a lead indicator of the ABS Retail Trade.

The AFGC CHEP Retail Index is published quarterly, with the next announcement due in late October 2011. To read the Index and access more background visit the AFGC website or www.chep.com/index.