Retail spending continues to improve

Official figures show Australian retail spending rose 0.8 per cent in September. Source: AAP

RETAIL spending rose for the fifth month in a row in September, driven by strong department store sales and a bounce in consumer confidence.

The better than expected spending figures have the industry hopeful of the strongest Christmas period in several years.

Retail trade grew by 0.8 per cent in September to $22.15 billion, beating economists' expectations of a 0.4 per cent rise, the Australian Bureau of Statistics said on Monday.

National Australia Bank senior economist David de Garis is hopeful consumers will continue to open their wallets rather than save.

"It's tentative at this stage, but there's some hope that consumer spending was more resilient in the second half of the September quarter on the back of higher consumer confidence overall, rising house prices and somewhat lower anxiety over unemployment expectations," he said.

"They've been indicating over recent quarters much less urgency to pay down the debt and mortgage as the wisest place to save.

"Perhaps the memories of the global financial crisis are fading somewhat."

JP Morgan economist Ben Jarman said there has been a distinct improvement in consumer confidence.

"Department store sales have been the clear outperformer for the last couple of months, but that was after they essentially tanked in July, so we think it's coming back after a bit of a distortion at mid-year," he said.

However Mr Jarman is doubtful that retail spending will continue to rise.

"Income growth has been so weak, the hiring side of things has been so poor for so long, so we're a little bit sceptical about whether this can be sustained," he said.

"Income growth remains non-existent, and with the saving rate remaining high and credit growth low, households are lacking the fire power for a sustained surge in spending growth."

Stronger sales could stimulate hiring by retailers, but at the moment employers have very little pricing power and are operating under thin margins, Mr Jarman said.

"This is not the environment to hire or invest," he said.

Department store sales rose by 2.8 per cent in September, and the clothing and footwear category posted a 2.5 per cent sales rise.

Australian National Retailers Association chief executive Margy Osmond is expecting a bigger Christmas for retailer this year.

"We're hoping we're going to see something like a four per cent increase on spending from last Christmas," she said.

"That's the best we've seen in many years and it tells you people are feeling a bit more confident about spending an extra dollar."

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