Industry data reveals a mixed bag on the consumer sentiment and spending front. Numbers gleaned from Morningstar Director Johannes Faul revealed that despite rising inflation and monetary tightening, Australians haven’t cut back their spending on the fun stuff such as technology and clothes.

Indeed, discretionary retailers such as JB Hi-Fi (ASX:JBH), Premier Investments (ASX:PMV) and Super Retail (ASX:SUL) have reported robust trading.

In fact, the trend seems to have continued since retail stocks rallied in July. However, the outlook for these businesses will be a little challenging off the back of a more conservative consumer.

AMP Capital Chief Economist Shane Oliver believes that a slowdown in consumer spending is expected to emerge in the next six months. A view, it seems taken by the Reserve Bank as it slowed down the pace of its rate hikes in November.

In his most recent note, Faul noted that consumer sentiment has been deteriorating in recent months and could translate into higher savings rates and less spending. The Westpac Melbourne Institute Consumer Sentiment Index fell to 78 points in November 2022 – similar to the lows seen in the early days of the pandemic and during the global financial crisis. Not surprisingly consumers with mortgages were among the survey respondents most concerned about their personal finances and the economic outlook.

It's also not surprising that Faul expect sales growth to weaken as consumers tighten their belts and say goodbye to new whiz bang home gadgets and even camping holidays.

“Within demand for discretionary goods, we forecast sales to soften the most for retailers in consumer electronics, furniture, and recreational goods—including sports and camping gear, “Faul notes.

There is one business, however, that Faul likes, not only because of its price. Kogan (ASX:KGN) is also well positioned for an expected pickup in consumer demand for online retail.

As an online pure play, “we expect Kogan to lap exceptionally strong COVID-19-induced sales sooner than its omnichannel peers, and we anticipate Kogan’s sales growth to reignite over the remainder of fiscal 2023.”

Faul also noted that the sombre numbers around Christmas spending may not always translate into meaningful consumer behaviour.

According to the Westpac Melbourne Institute Consumer Sentiment Index almost 40% of respondents expect to spend less on Christmas presents than what they had planned in 2021, a similar level to 2009.

“But sentiment doesn’t always manifest itself in actions,” Faul says

Here he highlights that the poor reading in 2009 due to the global financial crisis seemingly didn’t weigh on actual consumer spending.

In the two months of November and December 2009, total Australian retail spending increased by 5% compared with the previous period. During Christmas trading in 2008, total retail sales were up 4% on the previous period. Here’s hoping to a less than expected sombre Christmas and New Year.