llar, lower cost of finance are playing out largely for the benefit of retail at the moment against the economy – it’s still working through the downside of the mining boom, which is a challenge,” said Rumbens. Reduced price pressures across the economy, including subdued inflation, have mitigated the impact on real household income growth with Deloitte noting that the recent decision to cut the interest rate by the RBA as also supporting the disposable income of mortgagees in the economy. “The lower cost of finance is also helping support some credit spending, but it’s also helped push up house prices in some capitals – and that’s been a pretty strong wealth driver because people who own their own homes have been more willing to spend their income because the value of their housing’s gone up.” The difficulty now facing retailers, according to Rumbens and Deloitte, is that many of those supporting factors are temporary – one-off boosts that supported retail spending but are now likely to fade. Australian retail sales growth slowed in early 2016, to now be 3.6 per cent over the year to April 2016. “We’re expecting pretty slow growth in retail trade over the next six months of 1.2 per cent, partly because those things that have been benefitting retail are maybe slowing down,” said Rumbens. Deloitte see retail sales growth slowing to 2.5 per cent in 2015/16 and 1.9 per cent in 2016/17 – in comparison to 3.3 per cent for 2014/15. Meanwhile the Australian Industry Group Australian Performance of Services Index (Australian PSI) lifted by 1.8 points in May to 51.5, indicating expanding activity across the services sector after flat returns for two months. “The return of the large services sector to expansion in May is good news for the sector and a sign of the resilience of the economy even as it continues to transition in the wake of falling mining-related investment and lower terms of trade,” said Innes Willox, Ai Group chief executive. “Sales were higher and importantly new orders grew again in May,” according to Willox. “While these are clear positive signs, expansion was notably concentrated in three of the nine services sub-sectors with retail – health and community services; and finance and insurance all in the black, while property and businesses services was broadly steady.” The index is an indicator of services activity within the Australian economy and accounts for a national composite index based on the diffusion indices for sales, orders/new business, deliveries, inventories and employment with varying weights. Four of the nine services sub-sectors in the index were stable or expanded in May, led by retail trade (up 8.7 points to 61.5), finance and insurance (down 1.9 points to 58.8) and health and community services (down 1.0 points to 53.2). Access exclusive analysis, locked news and reports with Inside Retail Weekly. Subscribe today and get our premium print publication delivered to your door every week.