Pre-Christmas spending in 2023 is tipped to edge in line with last year’s results as shoppers increasingly tighten their budgets in wake of the cost-of-living crisis.

Provisional forecasts by the Australian Retailers Association (ARA), in conjunction with Roy Morgan, predict $66.8 billion will be spent in the November to December 24 Christmas trading period- broadly in line with last year (up slightly by 0.1% or $74,000)

The preliminary projection is subject to monetary decisions by the Reserve Bank of Australia (RBA) and Australian Bureau of Statistics retail trade data in the months leading up to Christmas.

Food spending is tipped to encompass the lion’s share of spending, making up $26.7 billion of the overall spend.

Compared to 2022, spending on food is projected to increase 2.4%, mainly driven by supply input price increases.

The categories of Hospitality (down 4.2%), Household Goods (down 3.2%) and Clothing (down 0.8%) are bracing for a softening of spending in the lead up to Christmas 2023 as cost-of-living pressures continue to bite.

Department stores (up 2.9%) and other retailing (up 1.7%) – which includes categories such as recreational goods, books, cosmetics – are poised to record sales growth on last year.

South Australia and ACT are set to record the biggest growth in sales on last year (up 1.2%), followed by Tasmania (up 0.7%), Western Australia (up 0.5%), Northern Territory (up 0.3%) and Victoria (up 0.2%).

Spending in Queensland (down 0.3%) and New South Wales (down 0.2%) is tipped to decline.

Consumers in New South Wales are forecast to spend $21.1 billion in the pre-Christmas period, with Victorians to spend $17.1 billion.

ARA CEO Paul Zahra said a softening of spending on discretionary goods is expected given the current economic conditions and the persistent cost-of-living crunch gripping the nation.

“The marginal increase in spending this year is being inflated by supply chain price increases, particularly in food, and an overall increase in Australia’s population,” Mr Zahra said. “If you exclude these factors, overall Christmas spending is in decline.

“For many discretionary retailers, up to two-thirds of their profit is made during the all-important Christmas trading period, so it is shaping up to be a period of business uncertainty this year.

“Last year, Christmas spending was bolstered by a record freedom spending phenomenon with delayed overseas travel, whereas this year – shoppers are expected to be much more conservative with their budgets.

“This year we anticipate a bargain-driven Christmas shopper, who will actively seek out the best deals and look for value purchases.”

While Mr Zahra said it is shaping up to be a mixed holiday season for retailers, consumers will be the beneficiaries.

“With increased competition and reduced spending across discretionary categories, retailers will be motivated to entice the budget shopper,” he added.

Mr Zahra said the success of the highly anticipated Christmas trading period will be at the mercy of upcoming cash rate decisions by the RBA.

“Australian mortgage-holders will be carefully watching the RBA’s decisions over the next few months with bated breath, but so too will retailers,” he said.

ENDS

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