Pre-Christmas retail sales hit record high of $66.8 billion – within 1.2% of Roy Morgan’s forecast

Roy Morgan's 2022 Christmas retail sales forecast conducted in conjunction with the Australian Retailers Association (ARA) of $66 billion seasonally adjusted for the key pre-Christmas retailing period was within 1.2% of the actual record seasonally adjusted retail sales result of $66.8 billion – the most accurate forecast since the COVID-19 pandemic struck Australia early in 2020.

Even more impressive were Roy Morgan’s retail sales forecasts covering the ‘Non-Food’ categories which include Household goods, Clothing, footwear and personal accessory, Department stores, Cafes, restaurants and takeaway services and Other retailing which comprise a greater share of discretionary spending and together cover about 60% of total retail spending.

Roy Morgan’s 2022 Christmas retail sales forecasts predicted total spending in ‘Non-Food’ categories would amount to $40.6 billion (up 7.8% on a year ago) and the final spending across these categories came in at $40.6 billion – an exact match and also In line with the ABS December quarter CPI figures.

Forecast spending in the Food category – the largest single category comprising about 40% of overall retail spending, was $25.4 billion, slightly lower than the actual result of $26.2 billion. The difference in this category was heavily impacted by significant flooding events in much of eastern Australia which led to unexpected inflationary pressures across several key food and grocery items.

The pre-Christmas retail sales period commences in mid-November and has been ‘super-charged’ during the last three years as Government stimulus payments and hundreds of billions of dollars of excess savings held by Australians have led to record retail sales growth during 2020-22.

The nature of the pre-Christmas sales period has also changed in recent years as a greater share of the sales have been brought forward in the calendar to the Black Friday/ Cyber Monday sales in late November.

The impact of Black Friday/Cyber Monday bringing sales forward into November is apparent from an analysis of the reported annual increase in ABS November Retail sales (+7.7%) and ABS December Retail sales (+7.5%) which show retail sales growth in November continues to outperform expectations.

Retail sales growth of 7.5% has largely kept pace with inflation in the year to December which the ABS reports at an annual rate of 7.8%. The resilience of retail sales growth is impressive when one considers the high inflation and eight consecutive interest rate rises during the last eight months of 2022.

Consumer Confidence provided a clear indicator of the challenges faced by Australians and averaged 81.8 in November/December 2022 according to the ANZ-Roy Morgan Consumer Rating, a large decline of 25.7pts on a year ago, and the easily lowest Consumer Confidence for the pre-Christmas period for over 30 years since 1990. In November/December 1990 Consumer Confidence averaged only 72.2.

It is important to note that Roy Morgan’s forecasts of the Original ABS Retail Sales figure for the pre-Christmas period of $76.7 billion (up 6.4% on a year ago) was within 1.3% of the final ABS Retail Sales figure for the pre-Christmas period of $77.7 billion.

State by State growth strongest in SA, NSW & Queensland – as forecast by Roy Morgan

Roy Morgan had predicted that pre-Christmas sales growth would be fastest in the States of New South Wales, Queensland and South Australia and analysing retail sales figures on a State-by-State basis shows it was South Australia which grew fastest with pre-Christmas retail sales growing 10.3% to $4.243 billion.

Growth was also clearly faster than the national average in New South Wales, up by 9.2% to $21.162 billion and Queensland, up by 8.8% to $13.793 billion.

The growth in retail sales was in line with the overall figure in Western Australia, up 7.6% to $7.36 billion but slightly below the national average in Tasmania, up 6.3% to $1.332 billion and Victoria, up 4.8% to $17.114 billion.

As mentioned earlier, for Victoria in particular, there are mitigating factors with significant flooding overtaking much of the state in late October and continuing throughout both November and December.

Retail Category growth led by Hospitality & Department stores – as forecast by Roy Morgan

Roy Morgan forecast the largest growth would occur in the Hospitality category covering Cafes, restaurants and takeaway food and the Department Store category and these turned out to be the two fastest growing categories in pre-Christmas spending.

Hospitality was by the far the standout category heading into Christmas as Australians were fully freed from pandemic restrictions in 2022 compared to ongoing restrictions and concerns about the new Omicron variant in late 2021. Total spending in the category soared 25.7% to $9.792 billion.

In a clear second place was the Department Stores category with spending up 9.1% to $3.544 billion.

The large Food category largely kept pace with the official inflation figures and increased 7.6% to $26.194 billion in the pre-Christmas retail period whereas spending on Clothing, Footwear & Accessories increased 7% to $5.665 billion.

Spending in the Other Retailing category was clearly below the level of inflation, up 4.2% to $10.2 billion while the boom in the Household Goods category appears to be over and was down 1.3% to $11.433 billion. Despite the decline the Household Goods category remains clearly the second largest spending category comprising over 1-in-6 dollars spent in the pre-Christmas period.

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Methodology

The ARA defines the pre-Christmas trading period to include sales from 12 November through 24 December 2022, and the post-Christmas trading period to include sales from 26 December 2022 to 15 January 2023.

Roy Morgan uses statistical modelling to forecast the retail spending trend for overall retail trade in Australia, in each of the eight States and Territories, and for six retail categories: Food retailing, Household goods retailing, Clothing, footwear and personal accessory retailing, Department stores, Cafes, restaurants and takeaway food services and Other retailing.

One of the key splits used to analyse spending patterns is between Food, which comprises about 40% of all pre-Christmas spending and ‘Non-Food’ categories, which comprises about 60% of all pre-Christmas spending and include more discretionary spending such as Household goods, Clothing, footwear and personal accessory, Department stores, Cafes, restaurants and takeaway food services and Other retailing.

The Roy Morgan-ARA Christmas sales forecasts are based on data taken from the monthly ABS Retail Trade Australia release. Note that online sales through Australian retail stores are included in the retail figures. Sales forecasts are determined by historical retail trade data from the ABS, Roy Morgan’s Consumer Confidence and unemployment data, and various other data relating to macro-economic conditions (e.g. income, inflation, interest rates).