The latest data shows that consumer discretionary spending has slowed to near molasses momentum.
The Commonwealth Bank’s latest Business Sales Indicator (BSI) rose by 0.3 per cent in May, compared with the 0.4 per cent gain in April and 0.6 per cent rise in March.
The BSI tracks the value of credit and debit card transactions processed through Commonwealth Bank point-of-sale terminals. The May BSI shows that while sales growth continues, spending has slowed for the fifth month in a row.
Despite the slowdown, sales across the economy have now expanded for the past 21 months, according to the report.
The more volatile seasonally adjusted measure showed a fall in spending of 1.3 per cent in May, after a 1.5 per cent increase in April. As a result, the seasonally adjusted annual growth rate fell to 4.0 per cent, its lowest level since August 2012 and a marked drop from the 11.5 per cent annual growth reported for April.
Blame it on the weather
“While businesses are likely to be disappointed with the latest figures, the slowdown in spending in May can be attributed somewhat to unseasonably warm autumn weather, which typically reduces spending on things like clothing and utilities. As these factors abate, it’s likely that we could see spending rebound over the coming months,” said Adam Bennett, Executive General Manager Local Business Banking, Commonwealth Bank.
Craig James, Chief Economist at the Bank’s broking subsidiary CommSec and author of the BSI report, agrees that despite a trend towards more conservative spending habits, the underlying strength of the Australian economy continues to provide a solid platform for future growth.
Aussies are increasingly debt-averse
“Australian consumers appear to be becoming more conservative when it comes to spending, particularly when it relates to taking on debt, with recent data on levels of personal finance, which includes credit card debt, falling by over 6 per cent over the past year,” said Mr James.
“However, there are good reasons to be optimistic about a rebound in sales growth. The latest figures from the Australian Bureau of Statistics show unemployment is steady at just under 6 per cent and the Reserve Bank Board minutes confirm that interest rates are likely to remain at current levels until at least November or December.
Ready to shop?
While most of the news for the BSI report falls comfortably within the “meh” category, there is one bright side. Aussie consumer confidence is showing signs of life.
“In addition, we’re already seeing a modest lift in consumer confidence, with sentiment back in positive territory after dipping into the negative after the release of the Budget, according to recent data from Roy Morgan, raising hopes that this month’s subdued sales figures may be temporary,” said James.
Here we are now, entertain us…
Ten of the 19 industry sectors saw sales fall in trend terms during May, the same result as for April but Aussie do love to have some fun.
As a result, the amusement and entertainment sector remained the fastest area of spending growth, adding 2.9 per cent for the month, and taking annual growth for the sector to 52.9 per cent.
Spending on Mail Order/Telephone Order providers was also higher, gaining 1.9 per cent, while hotels and motels saw sales rise by 1.1 per cent. On the other hand, the warm May weather suppressed spending in the Utilities and Clothing stores sectors, which fell 2.0 per cent and 1.0 per cent respectively.