Retail trade is starting to pick up, according to a new economic indicator.

The AFGC CHEP Retail Index, which was launched by the Australian Food and Grocery Council (AFGC) and logistics company CHEP Australia, shows retail trade activity picking up through the June quarter of 2011. It is moving from an annual real growth rate of 2.7 per cent over the year to the March quarter, up to 3.1 per cent over the year to the June quarter.

“The AFGC CHEP Retail Index movement is an encouraging sign for retailers, who have struggled to achieve any sales momentum through the GFC recovery period,” the index said.

“While income growth has been solid, consumers have not been willing to spend –as seen in a sharp increase in Australia’s savings rate over the past two years.”

The Index however suggests that retailers expect consumers to be spending more during the move into the new financial year as wage growth may pick up further, which is consistent with the tightness in the labour market.

Despite this, the index highlighted that while retail may be showing signs of improvement, challenges remain, including price pressures, the high level of the Australian dollar and strong competition in the grocery retail market.

The Index, drawing on physical and product movements throughout Australian supply chains, provides an early indication of economic activity, as well as insight into historical trends and a forecast for the next quarters activity.