NAB economists have stated the retail industry is “clearly in recession”, after the bank’s Monthly Business Survey for May 2019 found further deterioration in business conditions.

“While the retail industry has lagged the other sectors for some time, the recent deterioration has seen conditions in the industry fall to levels not seen since the GFC,” NAB chief economist Alan Oster said.

“This suggests that the consumer remains highly cautious with anything but spending on essentials because of ongoing slow income growth, high debt levels and possibly some concerns over falling house prices.”

However, business confidence rose in the month by 7 points – though NAB argues that given the index’s low starting point of 0 this is shows a just-above-average result.

The sharp bump in business confidence is likely due to the federal election result, and the rate cut delivered by the RBA, and Oster suggests this bounce will be short-lived and that conditions are unlikely to turn around any time soon.

NAB stated that it expects consumer restraint to persist for some time, while ongoing structural changes and intense competition in the sector will put further pressure on margins and drive further change in the industry.

Additionally, the Coalition’s $158 billion income tax cut package is unlikely to make a significant change to retailers, with the impact being delayed and marginal.

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