Mince on the menu as grocery costs, mortgage payments bite

“People will still eat, they will drink, but everything will just tighten up a bit. They may not buy the steaks, they may buy mince meat.”

His frontline staff are seeing a “fair degree of customer aggression” as shoppers complain about price increases.

“Customers are venting about price increases, and our produce managers have been verbally spoken to [about prices,” Harrison said.

The ASX200’s consumer staples stocks have dropped close to 9 per cent this month, while the ‘consumer discretionary’ sector – companies like Wesfarmers, Harvey Norman and JB-Hi Fi – has declined by 11.8 per cent.

Rising interest rates prompted equities analysts to downgrade major retailers over the past week, while taking a more positive view on supermarket stocks like Coles and Metcash.

Macquarie’s equities team said that while many Australian households have cash stashed in the bank, rising interest rates have altered their opinion about how much cash they ought to spend.

Loading

The major supermarkets acknowledge the rising price of staples in their stores. Woolworths committed to a six-month price freeze on around 200 products last week, while Coles has been directing consumers towards its lower cost home brand items and products which cost $1 or less.

Macquarie recently downgraded Wesfarmers and JB Hi-Fi on the premise spending on electronics and consumer goods will to fall.

Barrenjoey analysts predict cost of living pressures will impact Australians most in the next financial year, with wage rises not enough to cover rising household expenses.

“The natural reaction will be to pull back consumption on discretionary categories, especially in those categories that had a demand pull-forward through the COVID.”

The Australian Retailers Association acknowledges tough times are coming for many retail segments, but chief executive Paul Zahra says the recent ramp up in spending is a positive.

“Retailers are experiencing one of their busiest months of the year with the mid-year sales in full swing, which the ARA forecast will result in an $8.8 billion spending boost,” Zahra said last week.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.