While the retail industry is in a slump, the Australian Food & Grocery Council CHEP Retail Index shows that retail trade activity was high for the month of June.

In fact, the index found increased by a rate of 3.2 per cent year-on-year while for the June quarter as a whole, the index rose by 3.1 per cent year-on-year.

According to the report, a key driver for the increase year-on-year has been the ongoing theme of food inflation in 2011 along with the strong competition in the retail market which is expected to continue to drive supermarket sales growth higher.

The AFGC CHEP results also indicate the continuing strong Australian dollar has contributed towards cheaper imported goods and has encouraged greater online shopping from overseas. At the same time, households have become more cautious about their spending decisions, choosing instead to increase their savings ahead of purchasing retail goods. Consumers are looking to minimise discretionary spending, rebuild equity and repay excess debt. Consumers’ concerns are linked to higher living costs and the uncertainty associated with the implementation of the proposed carbon tax.

As a result, it is predicated that retail activity growth will slow down for the September quarter, increasing by just 1.5 per cent year-on-year. This growth projection of retail sector activity is lower than the rates experienced for the March and June quarters of 2.7 per cent and 3.1 per cent year on year respectively. The modest growth forecast for the month of August 2011 of 1.9 per cent year on year contributed to the forecast subdued September quarter.