More retail sectors went backwards in July according to the Commonwealth Bank’s measure of credit and debit card transactions, which shows retail sales fell 0.3% in July after dropping 0.5% in June.
The bank’s Business Sales Index (BSI) showed eight of the 20 industries tracked contracted during the month, compared to five industries in June.
“It’s just not turning around,” CommSec senior economist Savanth Sebastian says.
“If anything, it’s highlighting a worsening trend at the moment. You’ve had sustained weakness in consumer spending that is resulting in a larger array of sectors feeling that trading conditions are tough.”
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The weakest sector continues to be the automobile and vehicle in sector, where sales fell 2.2% in July, although this is partly due to continued disruptions to vehicle supply as a result of the Japanese earthquake earlier this year.
The “miscellaneous stores” sector (down 1.2%) and the mail order/telephone order provider sector (down 0.8%) were also were also points of weakness.
The best-performed sector again was the amusement and entertainment sector (which includes movie theatres, bowling alleys, golf courses and video stores) which was up 1.9% in July, followed by wholesale distributors and manufacturers (up 1.2%) and transportation (up 0.7%).
But Sebastian says it would be wrong to make too much of these little rays of home.
“The forward orders indices also suggest the next few months will be tough. Activity levels will come off further and it seems to be more broad-based than previously.”
He also says it is difficult to see the circuit breaker that will help retailers get back on track.
“Remember that this saving is by choice, rather than a necessity,” Sebastian says.
“If we see the sharemarket and the global economy get back on track – and I think you are looking to the fourth quarter with better weather and perhaps more optimism – that could be the catalyst for improvement.”
“But the RBA would be best served by staying on the sidelines at least until we see consumer spending rebound.”