Australia's retail sector has been in a recession for 18 months, Deloitte analysts warn

Australia's retail sector has been in a recession for almost two years as Aussies cut back on days out shopping, analysts have warned.

Deloitte Access Economics partner Dave Rumbens said retail spending continued to decline across six of the last seven quarters, forecasting a grim Christmas spending period.

"The evidence shows that Australia's retail sector has effectively been in recession for the last 18 months," Rumbens said.

"A retail recession sequel doesn't necessarily come as a surprise. In six of the last seven quarters, real retail spending has declined. And the numbers only look worse on a per capita basis.

"Real per capita retail spending has contracted for the last eight quarters and is now 2.5 per cent lower than June 2023 and 6.3 per cent lower than June 2022."

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It comes as the monthly inflation rate slowed to 3.5 per cent, down from 3.8 per cent in June.

With households tightening budgets due to mortgage rates and cost-of-living pressures, Rumbens warned that the coming months would be challenging.

"The period from now to Christmas is still expected to be a difficult one for retailers, but perhaps less of a slog than it has been," he said.

"As with most horror sequels, the characters are generally more prepared, and the plots generally more predictable."

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Analysis by Deloitte showed that real per capita retail spending contracted for the last eight quarters and is now 2.5 per cent lower than June 2023 and 6.3 per cent lower than June 2022.

"This sits against a backdrop of poor conditions across the economy more generally, with the labour market weakening and business insolvencies rising," Rumbens said.

"While these figures are poor, it's the one-third of consumer spending that goes to retailers that is going backwards, with negative growth of 0.6 per ccent in real spending over the year to June."

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